[StBernard] Conservative Review - Intersection for a Disaster

[Westley Annis]

THE CONSERVATIVE REVIEW - April 9, 2010

Intersection for a Disaster
by George Will

WASHINGTON - The times truly are out of joint when the most 
important IPO -- initial public offering -- of 2010 could 
come from what was American capitalism's iconic corpora-
tion for most of its 102 years. Andrew Bary, writing in 
Barron's, says General Motors "may go public in the second 
half of this year, and its stock market value could top 
$50 billion, more than Ford's $40 billion." 

This is justice under today's state capitalism: Ford took 
on $23.6 billion in debt to avoid becoming dependent on 
Washington, whereas GM shed much of its debt by becoming 
dependent. Washington, Bary explains, turned most of its 
$50 billion loan to GM into 60.8 percent ownership, the 
United Auto Workers got 17.5 percent for forgoing a $20 
billion health care claim against the company, and 
Canada's government got an 11.7 percent stake for $9 
billion. 

Detroit's long drive down the crumbling road to disaster 
is chronicled in "Crash Course" by Paul Ingrassia, formerly 
of The Wall Street Journal. It is a story of the hubris of 
a corporate oligopoly and the myopia of a union monopoly. 

When Henry Ford said people could have his cars in any 
color they wanted as long as it was black, the actual name 
of the color was, portentously, "Japan black enamel." But 
in 1927, GM hired Harley Earl, whose father designed 
custom cars for Hollywood stars, to head its Art and Color 
Section, a harbinger of Detroit's emphasis on cars as 
"visual entertainment" -- Earl's phrase -- rather than on 
the technological improvements Japanese automakers would 
come to emphasize. 

Enchanted by stabilizer fins on World War II P-38 fighter 
planes, Earl put tail fins on 1948 Cadillacs. By 1959 the 
fins were almost as high as the car's roof. The chrome 
protrusions Earl put on Cadillacs' front bumpers were at 
first supposed to project power by resembling artillery 
shells. Soon, Ingrassia writes, they were nicknamed 
"dagmars" after the breasts of a television starlet. 

But in 1959, an ad showing a Volkswagen Beetle in front of 
a suburban home asked, "What year car do the Jones drive?" 

This, Ingrassia says, "took direct aim at annual styling 
changes, which lay at the very heart of Detroit's business 
model." 

When Lee Iacocca ran Chrysler, it spent $2 million on gold-
plated faucets and other trimmings on the company's suite 
at the Waldorf. Even in the late 1980s, GM had segregation 
by rank in the "salaried men's rest room" and the "hourly 
men's rest room." Still, the UAW hourly workers flourished. 

In 1970, a 67-day strike against GM won, Ingrassia reports, 
"the company's 400,000 hourly workers (triple what the 
Big Three's combined total would be 40 years later) a 30 
percent wage hike over the next three years." Soon there-
after, workers could retire at any age with a full pension 
after 30 years on the job. "If the retiree lived to be 79 
or older," Ingrassia writes, "he or she would spend more 
years drawing a full pension than actually working."

Those still working did so under rules so complex that the 
table of contents of the contract was almost 20 pages long. 
Other autoworkers were unenthralled by such UAW triumphs: 
In 1986, the UAW abandoned its attempt to unionize Honda's 
Marysville, Ohio, plant by secret ballot plebiscite. It 
did not have the votes. Today, organized labor wants "card 
check" organizing so it can dispense with secret ballots. 

By the turn of this century, GM was being kept afloat by 
its financing arm, GMAC, which was deeply into subprime 
mortgages. Ingrassia dryly notes: "Some GM dealers in 
Southern California were taken aback when customers 
bristled at being asked to fill out a GMAC credit report 
for a car loan. They hadn't needed a detailed credit 
report to get a mortgage from GMAC on their new home." 

Studebaker shut down in 1966, and American Motors was 
absorbed by Chrysler in 1987. But compassionate government 
has stopped the Darwinian culling of the herd. 

When Washington bailed out Chrysler in the late 1970s, Alan 
Greenspan, then a Wall Street consultant, said the danger 
was not that the rescue would fail but that it would work, 
thereby whetting Washington's appetite for interventions. 
The bailout "worked" in that the government made money from 
it and Chrysler survived to be rescued 30 years later by 
an administration that, as a wit has said, can imagine 
the world without the internal combustion engine but not 
without Chrysler.