Monday, January 19, 2009

So Much Depends Upon...

I went for a walk the other morning and came across this old half of a GMC truck in a field south of my house. It struck me as an appropriate image about where GMC (General Motors Corporation) is today. I thought my friends in Ohio might appreciate the wry humor in it, since we've suffered from General Motor's cutbacks, which have taken the ooomph out of many "rust belt" communities. The part I like best in the picture is the coiled barbed wire sticking out. That piece of steel on the ground is pretty symbolic too. Something about it says, "John Henry was here."

John Henry, a symbol of the strong worker in America's age of industry, was, in the end, a story about the futility of people fighting the advance of technology. The story says that in order to save people's jobs, John Henry took on a contest with a machine to try to prove that people could do the job of clearing land and drilling tunnels for the railroad faster than the new machine. He won the contest with a heroic, super-human effort, but dropped dead from exhaustion when it was over. So that's a sad story. But by now we all know that brains have eclipsed brawn in America. The machines have won the contest.

The red GMC truck in the picture is out there in a big field. I don't see any buyers or easy bailouts on the horizon. It looks like a pretty old GMC truck, judging by the stylized logo, the rusty steel bumper and all. In an effort to try to date this red truck, I did some research and found out that GMC "Ducks" were used in WWII, and that they were driven in the Korean war, too. Here is the original logo, from 1911, which is more like the one on the truck in the field than the current block style logo:

Here's a closer look at the logo (and the flaking paint and the rust) on the red truck in the field:

GMC made mostly big trucks until about 1944. By 1961, they were using the current block-style logo. I found a logo like the one on the red truck on trucks that were manufactured in 1944 and 1956. So I the truck in the field was made sometime between 1944 and 1956, and most certainly before 1960. That means it has been around for about as long as I have. Uh-oh. Am I obsolete, rusty, stuck in out in a field somewhere without an engine too?

I wonder what happened to the engine and the cab - this GMC truck isn't going anywhere, unless they hitch it to a horse or a tractor. That's probably what they do, because the tires still look pretty good. It even has a spare. Just to make sure you can see that it is missing its front half, here's another angle on it:

So the era of the big automobile manufacturers in America is over. I suppose a company can only prosper for a limited period of time, before it becomes top-heavy and bloated or outlives its usefulness. I looked at an 1850 census once and was amazed at the number of jobs that don't exist anymore -- blacksmith, miller, coppersmith. So we have to keep evolving. There are 11.1 million unemployed Americans who can attest to that.

The problems of automakers are as deep as they are wide. Some of these troubles are related to the credit freeze. But General Motors lost 38.7 billion in 2007 and another $21.2 billion in 2008. And most of that happened before the credit freeze.

In France, no one is buying cars either. The government has put together a bailout package there because in France 10% of the workforce works for automakers like Renault and Peugeot-Citroen. Car sales are down in Indonesia, too.

Chrysler, Ford, and General Motors are looking for low interest federal loans. Chrysler received a $4 billion loan from the US Treasury and wants $3 billion more. Ford has asked for $9 billion line of credit. GM received $4 billion on December 31st, which kept it from defaulting on payments due to its suppliers. And GM received another $5.4 billion last week.

There's been a lively debate going on across America about whether the car companies should be allowed to fail or not. On one hand, allowing them to fail will really hurt the US economy. Unemployment figures from November for some Ohio and Michigan cities that rely heavily on the auto industry prove that: Flint MI had 11.6% unemployment, Detroit had 9.5%, Toledo had 9.2%, and Dayton had 7.5%. For the sake of comparison, here in Logan, Utah the unemployment rate for November was 2.4%.

On the other hand, why should we subsidize corporations that have irresponsible or misguided business practices? In discussing the financial industry bailout, Dennis Kucinich, a liberal senator from Ohio said, "This is a massive transfer of wealth - taking dollars out of taxpayers pockets and putting it in the banks."

I don't think there's much debate over the need for the US Treasury to put stipulations on the way the automakers use any loans they receive. But the US Treasury doesn't know much about making or selling cars. So there are limits to that strategy.

Naturally, strong companies survive and weak ones die. But do we want natural principles to prevail when the failure of US automakers could drag the whole country down? The Chrysler bailout of the 1980's was successful. So it seems to me that we should give it a try, or at least do something to help the companies, workers, and communities gain a little time to adjust to failure.

I can remember the opening of the new GM truck plant in Dayton, Ohio in the early 1980's. I toured it then, and it was like a buzzing city inside those walls. There were fire engines in there, and robots getting parts off the shelves behind wire mesh partitions, and an automated assembly line where the right fender dropped down out of the ceiling at the perfect time to meet the body of the car and the welder's torch. It was a spectacle and something of an engineering miracle.

My sister just bought a Honda Fit, which is a highly recommended little car, made for today's driver and last year's gas prices. I drive a Mazda. So how can I lament the demise of the US automakers? If I was going to buy a truck today, I think I'd buy one that was made in the US. But US automakers DO know how to make trucks. Which brings up another factor in this complex issue. If we want the US automakers to survive, I guess we need to think more seriously about buying their products, just as they need to think more seriously about making products that we want to buy.

In the end, I suppose all I can do is offer my photo at the top of the page, which sort of says it all. Maybe GM could use it for an advertising campaign with emotional/nostalgic appeal! Would you buy a vehicle from a company that made a truck more than 50 years ago that has lost its engine but is still sitting out in a field somewhere in Utah holding barbed wire and some sort of farm implement? Well, I guess not. Time marches on. But here's my last word on the subject (with apologies to William Carlos Williams):

so much depends

a red

glazed with

in the white
snow-covered field


Liz said...

Great post! :)

Sue's Western Adventure said...

I like your observations about GMC. With respect manufacturing, the pull through for every factory job is 4 to 1. For every job on the line, four are there to support it whether wholesalers or contracted out suppliers. I am still very much the reader at bedtime and do a lot research and a couple of things do come up. Bush's agricultural bill in 2002 or so subsidizes agriculture to the tune of 22 billion dollars a year along with crop loss insurance or, in other words, guarantees profit with no assurance of selling the product back American public. Have you noticed the price of bread? We subsidized the wheat farmers (guaranteed profit) and then sold it over overseas. But what about the pull through on labor? It is virtually non-existent. Ayn Rand, Milton Friedman, Alan Greenspan of trading without tariff's failed. All of our trading kept their tariff's to fund their federal treasury. In addition, Japan, China, and the European Union invest heavily directly into manufacturing beause manufacturing has the best employment record. I have turned away from the conservative Republican notion of economics of Articles of Confederation of weak government (8 years of Bush) and their economic principles of land, monopoly, and banker's right's (the rentier class that earns income while they sleep) that genuinely believe only they have access to Federal, State, and local government treasuries that I pay taxes into and expect something in return for my own welfare. After twenty-five years of Reagonomics of business peeling away from the treasury using subsidies and tax breaks has left us with the well subsidized extraction industries of oil, coal, gas, and agriculture that ships commodities overseas in return for finished goods. The agricultural bill collapses the farming industry in Mexico and that is why we have so many immigrants. Texas cotton never turned a profit in decades. The classic argument of why democracy will fail always goes back to the 18th century British debate that it will fail because it will never be decided who has access to the treasury, the rentier class or the people who pay taxes. As a businessman, I have gotten it more than once, in particular the Texas business people, that democracy does not work with preference towards the rentier class. They hate democracy because it is messy and gets in the way. Well, look what we've got now. We need the government now and see how the southern senator's are blocking legislation to help the unemployed, staving off home foreclosures, etc. The TARP went directly to the rentier class as a good example AIG (not a bank!) because of the million dollar plus annuities that the wealthy purchased. The 55 billion to CitiGroup was to offset the loss of the private Saud's investment into the bank which was--55 billion!. However, Alabama spent 3 billion of taxpayer money to bring in Mercedes. In conclusion, Republicans are lousy business people and have a preference of feudal economic policies of land, monopoly, and banker's rights that product nothing. I can say this unequivocally because I have been a businessman all my life. Economists today call it FIRE for finance, real estate, and insurance where like a piece of cloth it is passed around too many times that the ink on the dollar bill fades because it doesn't manufacture anything. Did you get the Harper's Gift?