Whistling Past the Graveyard

Posted by Matt Purdue

So what to do with GM and friends? Fascinating story in the New York Times hints at how GM and other automakers are failing at the public relations game as they beg and plead for a bailout from the federal government (e.g. taxpayers). 

Michelle Maynard notes that op/ed writers, lawmakers and the public in general are blaming automakers for their own troubles. And in that very American tradition, we’re telling the auto industry to take its lumps and pull itself up by its bootstraps.  After all, the automakers have for years been fighting higher fuel efficiency standards, insisting on making gas-thirsty trucks and SUVs in a world faced with volatile fuel prices and a global-warming crisis. And many American cars have slipped in the reliability ratings behind even South Korean models from the likes of Hyundai and Kia. 

But what’s really going on here? Bottom line is that we Americans have a love affair with gas-guzzlers. For years, Ford’s F-150 pickup and its chief competitor, Chevy’s Silverado, were America’s best-selling vehicles. Now get this: falling gas prices have spurred so much demand for SUVs that workers at GMs plant in Texas who assemble behemoths like the Cadillac Escalade are expected to be on overtime for the rest of the year turning out these monsters. This is 2008. How much more evidence do stupid Americans need that the actions of their gas-pedal foot correlate directly with rising temperatures, volatile weather, melting icecaps and drowning polar bears? And, really, who is an auto company CEO to stop them from driving a Cadillac Escalade (12 miles per gallon in the city)? 

Consumers need to take a hard look at themselves--and so do autoworkers. How onerous are the union contracts autoworkers strong-arm their employers into signing? You probably already know that GM factory workers get lifetime medical benefits from the company (GM recently announced plans to eliminate this freebie for non-union white-collar retirees). But did you realize that many GM workers have no medical insurance deductible and no co-pay? And that UAW contracts require the automakers to operate “job banks,” which pay thousands of workers full wages and benefits when they lose their jobs due to automation or plant closures? 

So there’s blame to go around. The sad part is that GM CEO Rick Wagoner can’t think of any way to communicate during this crisis. Michael Useem, professor of management at the Wharton School, tells the NYT’s Maynard that most Americans “couldn’t tell you anything about him, except that he’s been there a while and his company has gone from bad to worse.” Wagoner and UAW head Ron Gettelfinger are mired in local TV in Detroit, shut out of the national news shows. The heads of the Big Three automakers are currently being grilled in hearings on Capitol Hill, giving many Americans their first view of these so-called leaders. Whatever they have to say may be too little, too late, however. 

I’ve said it before and I’ll say it again: from a PR standpoint, today’s CEO is today’s business celebrity. CEOs need to make communications part of their job spec. Period. Need more evidence? Guess what newly named chief executive has begun weekly YouTube addresses, even before he’s officially on the job? 

Comments

[Milos Sugovic]

Matt, good blog post. Inefficiencies can be sustained for only so long with wasteful consumer behavior and government incentives, not to mention unionization. Look at the difference in compensation per hour at U.S. auto plants between the Detroit-3 and the Japanese-3: http://gregmankiw.blogspot.com/2008/11/cost-differences.html . There’s a 29$ pay gap propped up by collective bargaining. On top of that, foreign producers are weathering the same storm and facing the same decrease in quantity demanded, and they’re not complaining. So it’s no surprise the U.S. auto industry is under attack.