The Lobbyists That Brought You Telecom Immunity
Tucked into an article on GM CEO (and former AT&T CEO) Edward Whitacre’s promise that GM will return to profitability is this tidbit:
Last month, G.M. hired two former AT&T executives who had worked with Mr. Whitacre to run its Washington office.
Mr. Whitacre said he felt G.M. needed to improve its image with some lawmakers who had opposed its government bailout. “I think we need to take a new look at our relationship with Congress,” he said.
Whitacre retired from AT&T on June 3, 2007, just as the industry redoubled its efforts to win immunity for cooperating with the Bush Administration’s illegal wiretap program. So presumably, these two people are the same people who managed to win AT&T immunity for its crimes. Back on the job, buttering up Congress on cars.
Now, to be fair, I absolutely agree with Whitacre that some members of Congress opposed the GM bailout out of ignorance, particularly, of GM’s already-started efforts to turn around. As well as an overall ignorance of how the auto industry works (not that I’m confident that either Whitacre or these telecom lobbysts know anything about that yet).
That said, Whitacre seems to have tied Congressional support to reversing the decision on closing some of the GM dealers.
Mr. Whitacre also said he expected that “a large number” of G.M. dealers who had been jettisoned during bankruptcy were likely to be reinstated through an appeals process approved by Congress.
He said that G.M. made “some mistakes” when it cut more than 1,000 dealers, and that some would be welcomed back if they were reinstated through appeals.
Other dealerships that were cut might not get the same welcome, even if they win their appeals. “If they were a lousy dealer with a lousy storefront and they are put back, that wouldn’t be a good thing,” he said.
As I’ve explained before, the need to close dealers stems not only from a need to get rid of the “lousy” dealers, but also to trim a bloated dealer network to better compete with manufacturers that have newer, smaller dealer networks, like Toytoa and Honda. Yet Whitacre here seems to have given up that goal in an effort to placate Congress.
The best way to improve Congress’ (and consumers’) impression of GM is to improve the overall brand. And one thing contributing to GM’s crappy brand image (as well as its crappy profitability) is the fact that consumers expect to get huge rebates every time they walk into a GM dealer, which is partly caused by the bloated dealer network. That’s why you need lobbyists in Congress — to explain why GM needs to trim both lousy and average dealers if it wants to be competitive with the Japanese manufacturers. But it doesn’t look like that’s what Whitacre has in mind.
Note: I’ll be spending quite a bit of time early next week with GM folks at Detroit’s North American International Auto Show. Anything you want me to ask about your taxpayer-owned auto company?
Off-topic: Marcy, what is the deal with how the commenting system is handling quotation marks and apostrophes?
On-topic: Yeah, ask them this: Can you give me one good reason why this whole hemorrhage of tax dollars shouldn’t be completely shut down right this second?
(I can come up with some of my own, but I want to hear theirs to get a feel for where their heads are at.)
I think I can answer that.
1) Because GM (unlike Chrysler, probably) will pay much if not all of this money back
2) Because GM supports a hell of a lot more jobs in this country for a hell of a lot less money than the banksters
3) Because we’re already hemorrhaging our technical and manufacturing capacity in this country and the place where the greatest concentration of that expertise is is in the auto industry
Any other questions? We let GM go under and the acceleration toward Banana Republic status accelerates considerably. And the support we’ve given GM is far less, relatively, than other countries give their manufacturing around the world.
GM needed the “bailout” to help finance it’s new plants in Asia and South America. Was nice. Another “too big to fail” moving it’s jobs where cheaper, and Americans still say to support them?
Freep?
Marcy,
Please ask them if they ever read A.P.Sloan’s autobiography, My years with General Motors.
It’s really a fascinating read, especially at this point in time, because right after he joined GM they went (essentially) broke and had to be bailed out by the DuPont’s and JP Morgan. So in about 90 years GM has come full circle.
Here’s a sample from the book.
Of course the details are all different today, but there’s a lot in that book GM exec could learn from today, which is why I’m curious if any of them have read it.
What are the mpg targets for GM cars in the next five years and why can’t we get cars that will yield 50 to 60 mpg in that amount of time? Also, what proportion of the fleet will be operating with electric or hybrid power systems in the next five years and why do you think management is dragging its feet on achieving at least a 40 percent target for this venue?
I can answer that, too. THey’re not profitable.
Which would you prefer? The Government to subsidies GM indefinitely? Or GM to make some (though not the Volt decisions) based on profitability?
Oh, and one more reason they’re “dragging their feet.” Because this country refuses to incent mileage in ways that actually make it profitable for manufacturers. Want to pay a real gas tax? You’ll see a huge increase in mileage. Go talk to DC and see if you can get that passed, though.
Because the general American public still does not yet want to buy those kinds of cars and it would be economic suicide by GM to try to cram them down our throats. Secondly, the production facilities are not in place for that, as it would require every car made to either be a micro-mini or based on Volt technology. Thirdly, no one wants to buy the little crackerboxes you describe. that is also fourth and fifth by the way.
As an owner of a 2002 Prius “crackerbox” I completely agree with you that most Americans don’t want them. GM needs to make cars that people will buy, not what other people wish to force consumers to purchase in a perfect world. I like my car as much as an old Corvette I used own but for radically different reasons. If GM creates cars that are economical, well-built and properly sized they have a chance of recovery. Whether I buy one or not doesn’t really matter.
Marcy, maybe I’m misreading your tone, but it sounds as if you think I’m attacking GM. I’m not. You and I already know what’s at stake. I want the question asked of GM management because I want to make sure they know what’s at stake, given that Whitacre and his lobbyists don’t have auto-industry backgrounds.
Peace.
EW –
If I had the ear of a GM exec, this is what I’d ask: “I know that certain options save money and, therefore, either reduce the price of a vehicle and/or increase profits, but do you really think that selling cars with rear drum brakes in 2010 makes any sense in terms of the brand?”
Now there’s a good question. Thinking of a particular model?
Mostly the trucks and weird cross-over thingies, like the HHR. Ford went to standard rear disks on it’s trucks a long time ago. (I don’t know if it’s still true, but Silverados didn’t even have a rear disk option for a long time.) I think that all of this played a role in Ford’s rise against GM in trucks, which I believe is the most profitable part of the business.
(Note: since a lot of what I’m saying comes from conversations at local, amateur car races, and I quit this 18 months ago, I might be out-of-date.)
Will take a look. My model focus is probably going to be on the Spark, the Cruze, the Volt, and BUick in general–I haven’t scheduled any time with a truck person. But I will keep it in mind.
I’m sure there’s a good question about Oshawa (the town that GM built here) you could ask them, but I don’t know enough about the biz to come up with it. Maybe you could just find out where Oshawa/GM Canada is on their radar, if anywhere?
Questions for you:
1. Volt reliability. For a US new entry, that will be make-or-break.
2. How likely is it that economies of scale can push the price of the Volt down to compete with similarly sized internal combustion automobiles by 2020?
3. All electric Corvette? By 2025?
4. Who are the highest level executives who have come up through GM engineering as opposed to being marketeers or bean counters? What does their position say about the technological future of GM?
An all-electric Corvette, IMHO, would be a mistake. The target buyer for the Corvette would be turned off from the V8 model if there were an electric version available. (In this case, I’m thinking about the backlash against Porsche when that ridiculous SUV came out, which everyone knows is a dressed-up VW. Nothing helped Ferrari et al. as much as the Cheyenne. Wot a POS. The Aztec of Germany.)
1) Reliability looks excellent so far; but until there are a bunch on the road in customer’s hands won’t know for sure.
2) By 2020? Assuming the battery technology can be brought to scale as envisioned, yes.
3) Before 2025. I actually think by 2015 because they will need it to compete with Fisker.
4) Unfortunately, the recent trend at Whitacre’s behest is to have the top level from outside.
Great questions, too. I’m focusing on Volt and stimulus (a follow up to my post on the Volt from last year), which means I’ll have more time with the woman in charge of things like batteries and whatnot. But as you can imagine they will be focusing on the Volt, so I’ll also be attending a Chevy-specific event that would be a great place for these questions.
My question: with the increase in computer controlled systems, esp. electronic throttles, does the Volt have back-ups (kill switches) built into the system should a computer glitch cause unintended actions?
Will ask that. FWIW, GM is not the American company with similar throttle problem rates as Toyota–Ford is.
One thing about the Volt that I find very fascinating–but scary–is that it will be one of the first cars that, like most electronics of late, can be debugged remotely. That’s one of the reasons it’s so much easier to introduce “innovations” on iPhones and Microsoft products–because if the initial release has bugs, as they always do, you have the direct connection with the product to release a patch that fixes the problem.
My biggest complaint about the Volt, thus far, is that it really builds in the OnStar as a feature (so it will track how much drivers pay in electricity costs, for example). That’s a bit big brother-ish for me (and probably for a lot of potential Volt customers, who are likely to tend libertarian). But it DOES mean they’ve got the network to introduce patches that will fix some (though not all) problems.
thanks. my general concern is computer glitches that can’t be manually over-riden by the driver. with the new features being introduced with the volt & others, think i’ll wait a few years to see what kind of “bugs” pop up.
Oh, I understand that. My point was that regular cars–the analogs on the road now–are all already run by computers, by chips, so if the chips are a problem (and I personally think that’s one of the problems with Toyota–their chip programming tends to be done by very few contractors, meaning the problems in one car are replicated in other cars), they’re already a problem.
When I was talking to Ford and Toyota service guys two years ago, the Toyota guys told me Toyota service is getting to be more difficult (equivalent to Fords, in which bays are less automated and there are more diesels) because of their chip programming.
I am constantly surprised when people throw around the term “trim the dealer network” as the manufacturers did during bankruptcy last year as if it was at all a legitimate process.
Please try to put yourself in these dealers’ shoes. Pretend that you worked your entire life for your business and put every single dollar that you saved into your business. Your home equity loans go into the business, extensive loans, etc. And one day, the government sanctioned that your business will be taken away and given to your primary competitor down the street. (In most of these cases, the manufacturers are re-opening franchises in the same town where they closed a dealer.)
Remember the U.S. constitution? No one can take away your property without compensation? How have we allowed bankruptcy court to usurp this fundamental right of all Americans?
I know the recession was really scary and people were willing to do just about anything to get through it. But in the light of day, let’s now look at what happened.
If the problem was a bloated network (which I do not believe – more people selling GM cars means more places to get a GM serviced and more GM buyers). But if the problem was a bloated network, there were many legal ways that this problem could have been remedied. The “winning” dealers who have been given dealerships at no cost could have been encouraged to buy dealerships from the “losing” dealerships that were taken away. The economy was so rough that many dealerships were stripped away naturally. Or the manufacturers could have closed businesses legally following franchise laws which at least allows businesses a chance to reinvent themselves and get into another business.
The only thing that dealers have won here is the right to have their story heard. I think they all should be reinstated and treated more fairly. They won’t be. Many went into bankruptcy themselves and cannot afford arbitration and will never recover, either in their business or personally.
They all will no be reinstated but certainly the profitabl dealers who were shut arbitrarily should be…
Funny. I guess all those dealers who explained the bloated network problem to me in 2007 were making stuff up, then?
And the notion that more dealers mean more place to get your car serviced? You apparenlty don’t know the profit structure of these dealers you’re out to defend. Because when a dealer sells a car but doesn’t do the service on it, they’re not really profiting–their profit relies on getting that service business, too.
The fact of the matter is that the only thing that distinguishes dealers from every other stakeholder (including the union–where were you when GM got to break its contract with the union) is that dealers are more influential with members of Congress. That’s it. Otherwise, their contract which can be broken in bankruptcy is the same as every other contract.
Yes, I understand that in many cases, people have had these dealers for generations. By the same token, many of the workers have been associated with GM for generations. There’s no legal exception for people who have had lifetime-long contracts in bankruptcy law.
And let me be clear. Those dealers who were saying that a bloated dealer network was killing them? They were dealers who owned Toyota and Ford dealers and when asked the question, “why is your Toyota dealer more profitable than your Ford one,” they said, “because there are too many Ford dealers.”
I am sorry to say that I grew up around car dealerships, and have friends that are losing multiple dealerships in one family, and you are still wrong here. It is a brutal fact that contracting the number of dealerships is absolutely necessary. And, no, the manufacturers themselves are not opening competition exactly where closed dealers were; they are simply consolidating and unifying dealers in relevant areas.
EW, why do you think that some of them aren’t just “lousy” dealers? There’s bound to be some, aren’t there?
Yes, absolutely.
Nice reframing of GM’s corporate spin. GM’s turnaround, as opposed to Congress’ willingness to provide further cash or legal subsidies, is a function of Whitacre implementing marketing, engineering and production reforms.
That he’s hired two cronies from his AT&T network is no surprise. That’s what CEO’s do as they move from one lucrative job to the next. That he hired lobbyists is disappointing but unsurprising. He doesn’t know shit about making cars, how that business is different than telecoms, and doesn’t care. He’s digging deeper into what he knows, not what he needs to know. Like insuresters and banksters and other bootstrap-independent capitalists, he senses this is a Congress willing to extend the government teat to any corporate puppy that finds it. He won’t get browny points for missing out.
That Whitacre tossed the few remaining top car guys who knew the business – rather than integrating them into a larger network with his more well-known AT&T proteges – suggests that the road he’s traveling down is to prettify GM enough for a later slice and dice sell off, not its rebirth. We should have let the Chinese buy it if that’s what he’s doing, except that then his pals at Goldman wouldn’t have made nearly the killing they will later.
I have some advice for Ed Whitacre that will save them a lot of money—take your own:
“If the leader truly leads, he remains – the leader. Master-poet, master-painter, master-workman, each in his turn is assailed, and each holds his laurels through the ages. That which is good or great makes itself known, no matter how loud the clamor of denial. That which deserves to live – lives.”
Excerpt from The Penalty of Leadership, an ad for Cadillac in 1915.
The entire ruling class is compromised and corrupt.
For a little late night hilarity, see this Der Spiegel photo and article asking, how much Bush is there in Obama. The photoshopping is simply maahvelous.
OMG!!!
is it true??
I’d say der Spiegel created a bipartisan image comprised of about half Bush, half Obama. It looks a little like the mercenary alien stalker in the X-Files.
Hmmmmm….
It’d be more accurate to say that the headline says “How Much Bush Sticks (with) In Obama?”
Mark my words, Obama can’t go back to the same Germany/Europe he visited as Candidate Obama. Particularly after the next/upcoming SOTU.
The Youtubes are worldwide yanno.
Bush sticks? Are those unlimited at Olive Garden?
The apparent economic idea in hiring the former AT&T executive must be something like DeLorean’s book “On a Clear Day You can See General Motors” AT&T the masters of espionage and monopoly, although I don’t think even the former executive from AT&T can cheat their way out of GM’s problems unless of course they start a war or steal an innovation!
Simpler (less precise) explanation.
IMO, Detroit’s major systemic failure has been to concentrate their efforts on influencing the government to shape the business environment to fit Detroit’s model, rather than sensing and adapting to change in the market.
After a bit of talk, they are turning to the skills which they have honed to dig this hole.
Simple reason why the Big 3 are failing. They make junk. Period. And in some areas, there are more “foreign” corporations providing jobs (Honda, Toyota) than GM, Chrysler or Ford. So who do you support? I’d say whomever makes the best product and the last 20 years that hasn’t been the big 3. It does say something to Henry Ford’s idea that if you make an assembly line, and train each worker to do one thing, it’s done well. Nope it isn’t.
“Anything you want me to ask about your taxpayer-owned auto company?”
Yes, when do I get my money back?
And while you’re there, emptywheel, check out the Ford stand. You know, for the new 2011 Mustang GT with the new 5.0-liter V8. Makes me wonder why I wanted a Camaro in the first place.
And for some ungodly reason, I’m falling in love with the new Audi S4…
Marcy,
You can ask them why their even wasting time building cars, Predator drones, hellfire and cruse missiles is where the moneys at. Plus the way were going through them they will be in short supply soon.