Back on June 3 I went on record saying this would happen. Keven Meyer has captured it better than I could in Evolving Excellence. But, just for the record, here is my prediction:

No matter what the President wishes about maintaining “hands off” management, that isn’t going to happen once the corporate constituents realize they can use all of their lobbying tools to influence corporate decisions. I hope I’m wrong about all of that.

I still hope I am wrong. But I think this is going to look more like the military attempting to close bases (and being blocked by Congress) than it is a desperate auto company trying to to regain its footing.

Once government comes into the picture, government control, and then government politics follow. This can’t be good for GM, the USA, or the auto industry in general. As long as the .gov owns controlling interest in a hobby auto company, this is only going to get worse.

Now – is the UAW going to figure out that what remains of their pension and retiree medical funds (which are largely in GM stock) are being put at risk by the government  majority owners forcing an unsustainable cost structure onto the company?

It will be interesting to watch.

8 Replies to “”

  1. Oh gosh, after reading your post, I just realized that a large portion of the UAW have become government workers.

    (Maybe, in a manner of speaking, they always were government workers.)

    1. Actually the situation isn’t that clean, in my mind. With the government as a majority shareholder of a private corporation, the various interests that normally try to influence government policy can (and will) try to influence policy in the way this multi-billion corporation is run. As Kevin pointed out, to some degree, constituents are already lobbying Congress to influence dealer and plant closures.

  2. I’m struck by one thought that I don’t really believe but I will put out there anyway. Could this result in balance?

    I just happened to have read your recent blogs on the problems with traditional accounting and corporations moving at the whims of the stock analysts so I’m putting the two blogs together in my mind. I think that the government is absolutely HORRENDOUS at running a value stream. Look at the F-22 if you don’t believe it. They have no concept of customer focus and they have no understanding of efficiency. On the other hand, they might be very good Investors.

    As investors the .gov MIGHT be a lot less short sighted when it comes to the long term investments needed for the good of a company. If GM published a loss as a result of intensive training in operational excellence across the company for instance, the government investor would probably applaud that.

    Is it possible that a company with a culture of profit motive, who happens to get investors who care immensely about job growth, will turn into a company with long term, stable profit as a result of a long term vision? I can’t help but think that if I had to choose between day traders as my investors and the government, I would want the government.

    Call me Polyanna.

    1. “Is it possible that a company with a culture of profit motive, who happens to get investors who care immensely about job growth, will turn into a company with long term, stable profit as a result of a long term vision?”

      Sure, it is possible. It happens all of the time in successful publicly and privately held companies. Maybe not for job growth, per se, but certainly for long-term growth.

      But I don’t think it happens with the U.S. government as a majority investor or owner, especially when the Congress (and in particular the House) is so sensitive to lobbyists, letters from constituents, etc. I am less concerned about meddling from the Executive branch than I am Congress trying to flex its muscles and “protect jobs” by trying to make it illegal to make business decisions that would otherwise be rational adjustment to market realities.

      The legislative branch has, unfortunately, a pretty reliable track record of passing “feel good” legislation that either has no effect at all, or actually has negative impact. With the President’s heavy legislative agenda, it is all to easy to get past a veto by attaching provisions to high-priority, but otherwise unrelated bills.

      Again, I really hope I am wrong.

      Anyone else care to comment?

  3. The government (elected officials) will probably be very willing to spend tax dollars and create laws to make sure GM is successful. Which will help keep the elected officials in office and make the “party” look good. Seems to me that this would distort the normal capitalist business model. And it will tend to keep a bad company in business.

  4. What does the government want as an outcome? Do they want to control what auto makers make and what we buy? Do they want to support a huge dem voting block in the UAW? Or do they want a profitable value stream?

    1. I honestly don’t think the government (administration) had a long-term view in mind when the decision was made, other than some vague concern of the (likely exaggerated) consequences of a GM collapse and liquidation, and its impact on the supply base (the automobile-industrial-complex, if you will).

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