Evolution Shift
A Future Look at Today
May 3rd, 2007

GM, Toyota and the U.S. Government – A Historical Perspective

The news out of Detroit last week was that GM had given up the title of the world’s number one auto company to Toyota.  This was a development that had been expected, but when both companies reported first quarter sales last week, the numbers made it official.  Toyota sold 2.35 million cars and trucks, about 100,000 more than GM. These numbers were expected, as GM had made a decision last year to cut back on bulk sales to rental companies which have historically been included in the total sales numbers.

The reporting in the media was predictable.  Why did this happen?  What did GM do wrong?  How will Toyota take over the title of being number one without stoking nationalistic trade conversations?  Then of course there were all the interviews with executives and assembly workers who have worked for GM for decades, discussing this occurrence with sadness and frustration.

Let’s take a look at this changing of the guard at the top of the automotive world through another lens, the lens of history.  First, it must be pointed out that GM has been the number one auto company in the world since 1931.  That is impressive!  Seventy-six years as the number one company in its category.  Do you think Microsoft will have as long a time as the number one software company?  How long did Xerox stay at the top of the copier heap?  How long did monolithic IBM stay at the top of the computer world?  All things must pass.

In addition to GM’s length of time as number one, the other amazing thing is that they did so during some transformative times. The Great Depression, WWII, the Cold War, the transition from the Industrial Age to the Information Age and into a new millennium.  GM was the quintessential American Industrial Age company.  The phrase “What’s good for GM is good for America” was really a profoundly truthful statement.  Until the mid-1970s when the wrenching changes from the Industrial to the Information Age began, America looked upon itself as the world’s industrial colossus.  GM mirrored America and America mirrored GM.  This is a key point.

Automobiles and cheap oil went hand in hand.  Big business and big labor(remember big labor?), admittedly with dynamic tension, worked together.  Centralization was good and the military industrial complex ruled supreme.  Coming out of the Great Society, entitlements were institutionalized by both GM and the U.S. Government.  It is this issue, along with the high price of petroleum that knocked GM off the top.

It has been reported that GM has a $1600 per vehicle cost for its workers health care and other benefits. Toyota does not have this obligatory overhang, as it is both a foreign company and has only recently been manufacturing autos in the U.S. The total amount of obligations for GM is in the tens of billions and is just staggering. It has been reported that GM cannot sell cars at a profit, and only the SUVs and trucks can be sold profitably.  What is bad for GM is bad for America.

GM is in the same position as America.  Beginning right around the time that GM became the number one carmaker in the world was the time that America, to pull itself out of the Great Depression started to institute such things as massive debt and Social Security.   This was intended as a short term fix, which, through the years of the post WWII prosperity and through the broad strokes of the Great Society became institutionalized.  GM just followed what the government was doing.  Both were doing the right thing for their citizens and employees.

According to the Institute for Truth in Accounting, the U.S. government has debt, Medicare, Social Security, Federal employee and veterans’ benefits totaling $54.56 trillion.  Yes, trillion.  Offset by $1.5 trillion in assets, leave a deficit of $53.06 trillion  The estimated entire net worth of U.S. households is $53.30, so all our assets barely cover the obligations.  Another way of looking at it is that every man, woman and child currently has an obligation of $176,700.   Parallel to the $1600 per vehicle of entitlements that GM owes. 

So if this obligation is one of the reasons that GM is no longer the number one carmaker, what does it imply lies ahead for America, currently the number one economic power in the world?  The future of America, or at least the future of a vibrant and economically healthy America is truly at stake.

GM was just following the lead of the U.S. Government.  The difference is that GM, as a public company, is accountable to its shareholders.  Unfortunately the U.S. Government has refused, by its’ evasive ways of accounting, to be accountable to its citizens.  GM is now facing the music and doing what it can. It will survive and through time will once again flourish, regardless of whether it is number one. When will the U.S. Government be forced to realize that it is systematically destroying our economic future? When will we start to hold those wanting power accountable on this huge problem?  2008?

 

 

 

 

 

 

 

 

 

 

 

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