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State of corruption (7/7/2010)
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|More from Jack Lessenberry|
Shaming our state (10/6/2010)
Making real change (9/29/2010)
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So they celebrated the birth of the "new" General Motors last week, which emerged from bankruptcy in a mere 40 days, precisely as long as Jesus is said to have spent stomping around in the wilderness.
According to the Bible, that experience purified the young man from Nazareth, who showed he was able to resist temptation and the devil on an empty stomach.
I don't know how many devils GM's new CEO, Fritz Henderson, has to fight off on a regular basis or even on a full gas tank. What I do know is that what his company just finished going through was also a sort of government-sponsored purification rite. It certainly wasn't the old-fashioned sort of disgraceful bankruptcy our Oldsmobile-driving fathers feared in the bad old pre-bailout days.
Nah. This was about as cushioned as a major amputation can get, courtesy of the politicians and the courts, who wanted to avoid crashing the economy by having General Motors completely collapse. Besides, after pouring in $50 billion in government "loans," we taxpayers own most of GM now, as you may know.
Anyway, the bankruptcy court divided the remains of what was once the world's biggest corporation into the good, or "new" GM, which, as I understand it, consists of everything good, or at least potentially profitable, in the old company. That includes Chevrolet and Cadillac, GMC, the division that makes the trucks, and Buick, which nowadays sells more cars in China than here. (Go figure that one out.)
Left behind, and grouped into a second corporation is the old, or "bad" GM, now with the enchanting name of Motors Liquidation Co.
Al Koch, the guy who led Kmart through its bankruptcy trauma in 2002, will be in charge of disposing of the dead wood. That means trying to get rid of 50 obsolete factories, many of which aren't very usable because they present serious environmental hazards.
Koch and a "turnaround team" from AlixPartners in Southfield will try to jettison these old plants, and then attempt to sort out and settle the claims of everybody who says the old GM owed them money. The government gave Smilin' Al something like $1.18 billion to get it all done. Meanwhile, the new, cleansed GM emerged from bankruptcy Friday and vowed not to repeat all the mistakes it had made before.
"Starting today, we take the intensity, the decisiveness, and the speed of these last several weeks and we transfer it to the day-to-day operations of the company," vowed Fritz Henderson, GM's 50-year-old new CEO.
Henderson went on to pledge that all the bad habits that had gotten GM into trouble in the past were being purged from the corporate culture. No more smug arrogance, no more inability to make important decisions in a timely fashion, no more spending billions on a whim to acquire some white elephant of a company far removed from GM's core business, which, if you forgot, is making and selling cars.
To be sure, Henderson talks a good game, but he has been part of that same deadly corporate culture his entire life. To make sure he stays on that path, the government has given him a boss: Edward Whitacre Jr., the new chairman of the GM board. He is a guy who hasn't spent a whole day in the car business; his whole career was in telephones.
But he does have a long history of knowing how to take charge of companies; take them over, build them up; take them apart, downsize and right-size them. So on paper, anyway, it looks as if GM is positioned to roar out of the gate and reclaim its place in the sun, yes?
And maybe not. What nobody wanted to talk about last week was that this is still a long shot. When the founding fathers had finished writing the U.S. Constitution, a woman asked Benjamin Franklin what kind of government they had given us.
"A republic," said the old womanizer, undoubtedly checking her out. "A republic, if you can keep it." That is, if we could remain a democracy, and not revert back to rule by a king.
The Obama administration decided that we-the-taxpaying-people should give GM a new lease on life, but it will be up to the corporation to keep it. That won't be easy, even if Henderson & Whitacre are visionaries and managerial geniuses. The New GM comes out of the incubator into what is still the worst economy in many, many years.
What's more, it is surrounded by more competition than ever. Almost certainly, the non-bankrupt Ford Motor Co. will pass the truncated new GM in sales, for the first time since buyers got excited over a new solid-black Model T. Toyota may eventually pass both of them — in this country. The Koreans are surging; the Chinese are coming. The odds are that the best GM can hope for is to be a solvent player in an auto world that you might describe as the Medium-Sized Six, plus assorted short subjects.
Still, there are a few hopeful signs; GM seems to actually have a hit, or at least a semi-hit car in its new Camaro. So maybe, just maybe, there's a chance. The new GM needs to hang on to the better parts of the old firm — the knowledge and engineering know-how, and the vision that, when not stifled, led to the creation of some pretty amazing cars.
Yet it has to combine that with some tough discipline. The bloodletting is not over. GM, which still has about 88,000 employees in this country, intends to get rid of another 20,000 of those. What will happen after that is anyone's guess. But we have to hope GM succeeds. First of all, they owe us $50 billion, which Henderson has pluckily promised to pay back before the 2015 due date.
And the last thing our economy needs is another major corporation failing, especially one that is such a symbol, and especially in this state. So, while I can't quite believe I am saying this ... we should mutter a little incantation for GM, on behalf of our economy, and all of us.
Exposing a myth: Few people in Lansing are willing to admit it openly, but the whole system by which the state collects the money it needs to operate is fatally flawed. The state is drowning in expenses relating to new unemployment claims, and less money is coming in.
What's needed is a better way of collecting revenue. The best and fairest choice would be to amend the Michigan Constitution so we could have a graduated income tax, something Republicans, especially the richer ones, regard as slightly worse than mandatory child molesting.
Yet despite years of propaganda, a new EPIC/MRA poll shows the people would welcome the idea. The survey showed that 54 percent of the public might favor such a proposal, while only 38 percent were opposed.
What about another possibility — lowering the state sales tax to 5 percent, but extending it to services, except perhaps a few categories like medical, business-to-business and education services?
The survey found voters like that too, by a 52 percent to 40 percent margin. That would be the easiest and probably best way to balance the budget quickly. But if the Legislature makes a serious effort to adopt either of these things, look for the Chamber of Commerce to scream like a thousand stuck pigs in a porcupine sanctuary.
Jack Lessenberry opines weekly for Metro Times. Contact him at firstname.lastname@example.org.