Interesting article about GM unions and management
Thread Starter
Registered User
Joined: Dec 2000
Posts: 2,574
From: Arlington, Texas
Interesting article about GM unions and management
Posted on Tue, Oct. 11, 2005
Wheels
That Darned Fat Cat!
Funny, I thought the revolution would help us.
By Ed Wallace
Special to the Star-Telegram
Thirty-one years ago, the General Motors Arlington Assembly Plant still offered public tours. So, in 1974, my first full year in the automobile industry, one of the elder salesmen at Houston’s Sam White finally made up his mind to drive north and see how our Oldsmobile Cutlass was made. Irv came back with incredible stories of watching the assembly process. As he shared his fascination with how tires were put onto the rims and whole bodies lowered from the upper tracks onto the chassis, he made the modern assembly line’s miracles real to us starry-eyed kids at home.
Then he stopped short, and his wonderment turned into a tirade about union workers. Half of the people he’d seen at GM Arlington, he maintained, had been doing absolutely nothing; one janitor had stood leaning on his broom the whole tour. “Unions will be the death of America,” Irv predicted, “because union guys mostly get paid way too much for doing too little.” That seemed strange to me. I didn’t actually doubt Irv’s word, yet I knew that even in a serious recession year, our dealership had sold 5,200 Oldsmobiles. Bill McDavid Olds across town had sold even more. Someone had to be working, to ship all those cars.
I have to say I’d noticed something else: Irv was the laziest salesman on our showroom floor. He’d been in the industry his entire working life, yet he regularly sold fewer cars than I did — and I didn’t have a clue what I was doing. No, Irv usually disappeared when customers came into the store, lest he have to wait on them. Nevertheless, because they attended the same synagogue and probably just out of sympathy, our sales manager handed him 10 – 12 car deals sold by management every month. Irv was certainly not a member of any union, but he was demonstrably doing absolutely nothing productive. I mentally started picturing a union label on his shirt and a broom in his hand.
Our Workplace Is Different How?
Of course, time has passed. Since then, whenever I’ve heard someone proclaim that American corporations are failing because unionized workers are seriously overpaid, I’ve simply reminded them that, wherever they were employed in this right-to-work state, there too some workers weren’t performing at their maximum. Further, if high pay alone were the sole reason that some American corporations have failed, then any corporation that paid its people well should fail also. That’s obviously not true — and it’s not true about unions, either.
Now comes Delphi Automotive, the largest automobile part manufacturer in the world, declaring bankruptcy. It claims that its cost per worker, counting retirement, wages and health care, has hit an incredible $130,000 per worker. (It hasn’t; foreign workers’ miserable pittances offset that figure.) How can that be? Why are so many companies now failing and throwing their pensions into the lap of the American taxpayer — while offering new union contracts that pay the equivalent of a counter job at the local convenience store? It’s an easy and verifiable story to tell: It’s GM in the eighties.
For 55 years, General Motors, like most American corporations, practiced conservative accounting; in fact, GM first perfected modern corporate accounting back in the twenties. Surviving recessions, a Great Depression and world war, GM offered employees defined benefit packages and health insurance that became the norm in the late forties. And they were never underfunded; in really good times, GM put more than was needed into those accounts, planning ahead for the industry’s normal cyclical nature. All that ended with the go-go eighties, when Roger Smith rose to become head of GM.
Prepare to Hiss
Sure, that decade started off tough because of the Energy Crisis of 1979; but Detroit also downsized by hundreds of thousands of workers in that period. However, on the day the Second Energy Crisis started, the Dow Jones Industrial Average stood at 854 — within a point of where it had been a decade earlier, in December of 1969. By the end of the eighties, the DJIA would leap by over 300%; and Roger Smith, like many American corporate heads, planned to make the most of it.
In order to do that, Smith, who’d grown up in GM’s accounting division, started playing with the numbers. He forced CFO Bob O’Connell to write off $1.2 billion in plant and tooling in the third quarter of 1987 — by reducing the useful life of those items on paper. Smith ordered O’Connell to escrow much less money into the warranty claims account, telling Wall Street analysts that GM products were so improved that the monies wouldn’t be needed. (He was wrong.) Then came the crème de la scam: Smith demanded that GM’s actuaries shorten the expected lifespan of employees on paper, so that the corporation could put less money into employees’ pension and health care programs.
These moves gave GM huge paper profits, which it used in part to make acquisitions it had no idea how to run in other industries. But the results also allowed Smith to brag to the Wall Street Journal, in December of 1988, that GM planned on seriously increasing its dividend payout if earnings hit $14 a share. Two months later GM shelled out $300 million in dividends and, for the first time in more than 30 years, split its stock two for one.
What no one knew then was that Roger had been cooking GM’s books. He even prepared false financial data for his board of directors’ meetings — and he wouldn’t let board members take it home, so they couldn’t unmask the deception. Along the way, and again unknown to GM’s workers, their pension and health care programs were being seriously underfunded — while their stock options made Smith and others rich.
Foolish Faux Footwork
There were problems, of course. Earning only about $340 per car at the time, GM was offering retail incentives up to $700 a vehicle to push those products. Then, as new products were introduced, GM’s accountants found that the manufacturing cost per car was out of control. No, not because of labor costs — although GM spent much more in labor hours per vehicle than Ford or Chrysler — but because of foolishly complex engineering. When Smith demanded to know why costs were skyrocketing, one accountant shot back, “Because we replaced the Celebrity, a low-cost-to-produce car, with the very expensive Lumina.”
Still, GM never admitted to the media its engineering mistakes, such as the Pontiac Grand Prix bumper’s having 170 parts, or 17 times as many as the bumpers of Accords and Camrys. No, instead GM publicly blamed the high cost of its unionized workers — when in fact their wage costs had dropped significantly because Smith was having less escrowed for their retirement.
Rich Con Artists
Neither the public nor the analysts pushing GM’s stock suspected what was happening until the early nineties. Too late: Roger Smith had already walked away carrying his last big score. He’d slipped a vaguely worded rule past the board of directors just before he retired in 1990, and they’d approved it, not realizing that it doubled Smith’s annual retirement bonus to $1.2 million.
By then the GM board, fearing that they might be held liable for GM’s financial deceptions under Smith, had become a serious shareholder advocacy group. Led by John Smale, former head of Procter and Gamble, and advised by legal counsel Ira Millstein, GM wrote off $20-some billion to correct Smith’s false accounting. GM was downsized; the board cut back Smith’s retirement by 15% (not the 50% they had unknowingly given him); and by 1997 the company had realized its best profits ever — without cutting workers’ wages.
All of Wall Street hailed this as heralding a new era of corporate governance in this country, a return to conservative accounting and the end of stock market fraud. Wall Street was wrong, too: WorldCom fell next, followed by Global Crossing, Enron, Tyco and so many others, not to mention the Internet bust of the late nineties.
Elliot Spitzer, New York state Attorney General, has proven many cases of intentional fraud on Wall Street. But blaming the high cost of unionized workers is intentionally misleading, when what’s often wrong is the high incompetence and fraud of a few executives, who blame everyone but themselves and make off with millions as their companies collapse.
Unbelievable But True
While Delphi’s new CEO, Steve Miller, was offering his workers as little as $10 an hour to stay, he’d already negotiated a huge settlement package for himself and 20 other executives — “in case they are let go or retired due to the company’s problems.” A Delphi official said their old executive package “wasn’t competitive.” And 10 bucks an hour is? Just another inequity: “competitive pay for employees” means Chinese wages, but “competitive pay for executives” means untold millions more.
Smith and Miller will never have to sign up for food stamps or be served an eviction notice — but you and I as taxpayers will likely wind up paying for the pension plans of Delphi’s workers, all the while blaming laborers instead of management.
Author’s Note: Special thanks to Paul Ingrassia and Joseph White’s book, Comeback — The Fall & Rise of the American Automobile Industry.
Wheels
That Darned Fat Cat!
Funny, I thought the revolution would help us.
By Ed Wallace
Special to the Star-Telegram
Thirty-one years ago, the General Motors Arlington Assembly Plant still offered public tours. So, in 1974, my first full year in the automobile industry, one of the elder salesmen at Houston’s Sam White finally made up his mind to drive north and see how our Oldsmobile Cutlass was made. Irv came back with incredible stories of watching the assembly process. As he shared his fascination with how tires were put onto the rims and whole bodies lowered from the upper tracks onto the chassis, he made the modern assembly line’s miracles real to us starry-eyed kids at home.
Then he stopped short, and his wonderment turned into a tirade about union workers. Half of the people he’d seen at GM Arlington, he maintained, had been doing absolutely nothing; one janitor had stood leaning on his broom the whole tour. “Unions will be the death of America,” Irv predicted, “because union guys mostly get paid way too much for doing too little.” That seemed strange to me. I didn’t actually doubt Irv’s word, yet I knew that even in a serious recession year, our dealership had sold 5,200 Oldsmobiles. Bill McDavid Olds across town had sold even more. Someone had to be working, to ship all those cars.
I have to say I’d noticed something else: Irv was the laziest salesman on our showroom floor. He’d been in the industry his entire working life, yet he regularly sold fewer cars than I did — and I didn’t have a clue what I was doing. No, Irv usually disappeared when customers came into the store, lest he have to wait on them. Nevertheless, because they attended the same synagogue and probably just out of sympathy, our sales manager handed him 10 – 12 car deals sold by management every month. Irv was certainly not a member of any union, but he was demonstrably doing absolutely nothing productive. I mentally started picturing a union label on his shirt and a broom in his hand.
Our Workplace Is Different How?
Of course, time has passed. Since then, whenever I’ve heard someone proclaim that American corporations are failing because unionized workers are seriously overpaid, I’ve simply reminded them that, wherever they were employed in this right-to-work state, there too some workers weren’t performing at their maximum. Further, if high pay alone were the sole reason that some American corporations have failed, then any corporation that paid its people well should fail also. That’s obviously not true — and it’s not true about unions, either.
Now comes Delphi Automotive, the largest automobile part manufacturer in the world, declaring bankruptcy. It claims that its cost per worker, counting retirement, wages and health care, has hit an incredible $130,000 per worker. (It hasn’t; foreign workers’ miserable pittances offset that figure.) How can that be? Why are so many companies now failing and throwing their pensions into the lap of the American taxpayer — while offering new union contracts that pay the equivalent of a counter job at the local convenience store? It’s an easy and verifiable story to tell: It’s GM in the eighties.
For 55 years, General Motors, like most American corporations, practiced conservative accounting; in fact, GM first perfected modern corporate accounting back in the twenties. Surviving recessions, a Great Depression and world war, GM offered employees defined benefit packages and health insurance that became the norm in the late forties. And they were never underfunded; in really good times, GM put more than was needed into those accounts, planning ahead for the industry’s normal cyclical nature. All that ended with the go-go eighties, when Roger Smith rose to become head of GM.
Prepare to Hiss
Sure, that decade started off tough because of the Energy Crisis of 1979; but Detroit also downsized by hundreds of thousands of workers in that period. However, on the day the Second Energy Crisis started, the Dow Jones Industrial Average stood at 854 — within a point of where it had been a decade earlier, in December of 1969. By the end of the eighties, the DJIA would leap by over 300%; and Roger Smith, like many American corporate heads, planned to make the most of it.
In order to do that, Smith, who’d grown up in GM’s accounting division, started playing with the numbers. He forced CFO Bob O’Connell to write off $1.2 billion in plant and tooling in the third quarter of 1987 — by reducing the useful life of those items on paper. Smith ordered O’Connell to escrow much less money into the warranty claims account, telling Wall Street analysts that GM products were so improved that the monies wouldn’t be needed. (He was wrong.) Then came the crème de la scam: Smith demanded that GM’s actuaries shorten the expected lifespan of employees on paper, so that the corporation could put less money into employees’ pension and health care programs.
These moves gave GM huge paper profits, which it used in part to make acquisitions it had no idea how to run in other industries. But the results also allowed Smith to brag to the Wall Street Journal, in December of 1988, that GM planned on seriously increasing its dividend payout if earnings hit $14 a share. Two months later GM shelled out $300 million in dividends and, for the first time in more than 30 years, split its stock two for one.
What no one knew then was that Roger had been cooking GM’s books. He even prepared false financial data for his board of directors’ meetings — and he wouldn’t let board members take it home, so they couldn’t unmask the deception. Along the way, and again unknown to GM’s workers, their pension and health care programs were being seriously underfunded — while their stock options made Smith and others rich.
Foolish Faux Footwork
There were problems, of course. Earning only about $340 per car at the time, GM was offering retail incentives up to $700 a vehicle to push those products. Then, as new products were introduced, GM’s accountants found that the manufacturing cost per car was out of control. No, not because of labor costs — although GM spent much more in labor hours per vehicle than Ford or Chrysler — but because of foolishly complex engineering. When Smith demanded to know why costs were skyrocketing, one accountant shot back, “Because we replaced the Celebrity, a low-cost-to-produce car, with the very expensive Lumina.”
Still, GM never admitted to the media its engineering mistakes, such as the Pontiac Grand Prix bumper’s having 170 parts, or 17 times as many as the bumpers of Accords and Camrys. No, instead GM publicly blamed the high cost of its unionized workers — when in fact their wage costs had dropped significantly because Smith was having less escrowed for their retirement.
Rich Con Artists
Neither the public nor the analysts pushing GM’s stock suspected what was happening until the early nineties. Too late: Roger Smith had already walked away carrying his last big score. He’d slipped a vaguely worded rule past the board of directors just before he retired in 1990, and they’d approved it, not realizing that it doubled Smith’s annual retirement bonus to $1.2 million.
By then the GM board, fearing that they might be held liable for GM’s financial deceptions under Smith, had become a serious shareholder advocacy group. Led by John Smale, former head of Procter and Gamble, and advised by legal counsel Ira Millstein, GM wrote off $20-some billion to correct Smith’s false accounting. GM was downsized; the board cut back Smith’s retirement by 15% (not the 50% they had unknowingly given him); and by 1997 the company had realized its best profits ever — without cutting workers’ wages.
All of Wall Street hailed this as heralding a new era of corporate governance in this country, a return to conservative accounting and the end of stock market fraud. Wall Street was wrong, too: WorldCom fell next, followed by Global Crossing, Enron, Tyco and so many others, not to mention the Internet bust of the late nineties.
Elliot Spitzer, New York state Attorney General, has proven many cases of intentional fraud on Wall Street. But blaming the high cost of unionized workers is intentionally misleading, when what’s often wrong is the high incompetence and fraud of a few executives, who blame everyone but themselves and make off with millions as their companies collapse.
Unbelievable But True
While Delphi’s new CEO, Steve Miller, was offering his workers as little as $10 an hour to stay, he’d already negotiated a huge settlement package for himself and 20 other executives — “in case they are let go or retired due to the company’s problems.” A Delphi official said their old executive package “wasn’t competitive.” And 10 bucks an hour is? Just another inequity: “competitive pay for employees” means Chinese wages, but “competitive pay for executives” means untold millions more.
Smith and Miller will never have to sign up for food stamps or be served an eviction notice — but you and I as taxpayers will likely wind up paying for the pension plans of Delphi’s workers, all the while blaming laborers instead of management.
Author’s Note: Special thanks to Paul Ingrassia and Joseph White’s book, Comeback — The Fall & Rise of the American Automobile Industry.
Registered User
Joined: Nov 2000
Posts: 2,139
From: Commerce, mi, USA
Re: Interesting article about GM unions and management
There's plenty of fodder in here for yet another h8r thread to fire up 
Just for the record though. Let's talk about the 80's. I had a Citation X11 which despite a few quality flaws, was a great and flingable performance car in its day. In fact, our Chevy dealer had a plaque on their wall from X11's winning showroom stock races at Mid-Ohio Road Course.
The stunning and wildly successful 3gen Camaro was released in 1982, and the still-coveted IROC-Z came out in 1985. The 1987 Buick GNX was a historic landmark in affordable GM performance cars, and remains prized by collectors even today.
So when people chronicle all the horrible crimes done by GM leadership in the 80's ( ) it *might* be good to keep a little perspective...
Just for the record though. Let's talk about the 80's. I had a Citation X11 which despite a few quality flaws, was a great and flingable performance car in its day. In fact, our Chevy dealer had a plaque on their wall from X11's winning showroom stock races at Mid-Ohio Road Course.
The stunning and wildly successful 3gen Camaro was released in 1982, and the still-coveted IROC-Z came out in 1985. The 1987 Buick GNX was a historic landmark in affordable GM performance cars, and remains prized by collectors even today.
So when people chronicle all the horrible crimes done by GM leadership in the 80's (
) it *might* be good to keep a little perspective...
Registered User
Joined: Mar 2005
Posts: 27
From: Motown
Re: Interesting article about GM unions and management
Originally Posted by BigDarknFast
There's plenty of fodder in here for yet another h8r thread to fire up
Just for the record though. Let's talk about the 80's. I had a Citation X11 which despite a few quality flaws, was a great and flingable performance car in its day. In fact, our Chevy dealer had a plaque on their wall from X11's winning showroom stock races at Mid-Ohio Road Course.
The stunning and wildly successful 3gen Camaro was released in 1982, and the still-coveted IROC-Z came out in 1985. The 1987 Buick GNX was a historic landmark in affordable GM performance cars, and remains prized by collectors even today.
So when people chronicle all the horrible crimes done by GM leadership in the 80's ( ) it *might* be good to keep a little perspective...
Just for the record though. Let's talk about the 80's. I had a Citation X11 which despite a few quality flaws, was a great and flingable performance car in its day. In fact, our Chevy dealer had a plaque on their wall from X11's winning showroom stock races at Mid-Ohio Road Course.
The stunning and wildly successful 3gen Camaro was released in 1982, and the still-coveted IROC-Z came out in 1985. The 1987 Buick GNX was a historic landmark in affordable GM performance cars, and remains prized by collectors even today.
So when people chronicle all the horrible crimes done by GM leadership in the 80's (
) it *might* be good to keep a little perspective...No offense but I have a different perspective. Agreed, there were some good vehicles that GM produced during the Roger Smith reign. But those came to fruition in spite of the inept and as some claim, corrupt, management. Recall that segment leading A and G body cars such as the GNX were killed off in favor of front wheel drive, thrifted to death, cookie cutter Roger Smith toads, such as the "W" car. Result? The then best selling mid sized vehicle, the Olds Cutlass, suffered plummeting sales. In addition does anyone recall the luxury Cadillac/Buick/Olds clones that were panned in the Lincoln commercials? Per dictate from Herr Smith, a vast majority of the sheet metal was shared to cut costs. Evidently it was too much shared sheet metal. Brand identity vanished along with sales volume. Only the very recent designs from Cadillac have begun to re-establish the marque to its former position of luxury leadership.
Been on both sides of the union vs management situation and both have their faults. And not by any means a member of the union fan club. But the scenario that has played out over the last twenty years where every bungled business move by management is blamed on the union just makes me ill. Where is the accountability? I still see management teams in place that in the last several years alone have lost close to $6 billion between the FIAT and Fuji ventures. Market share has fallen ten percentage points in the last ten years. Stock performance is abysmal. Open discussion of impending GM bankruptcy occurs almost daily in the media. And still no change to the coaching staff and philosophy? It defies logic.
Regarding "h8r" posts: Stating facts for what they are is no crime. Allowing these corporate curs to continue blaming working stiffs for incredible management ineptness, without retort, is.
Again, thanks for a great forum which allows all views to be communicated.
Registered User
Joined: Mar 2001
Posts: 4,000
From: TX Med Ctr
Re: Interesting article about GM unions and management
Originally Posted by D80
Been on both sides of the union vs management situation and both have their faults. And not by any means a member of the union fan club. But the scenario that has played out over the last twenty years where every bungled business move by management is blamed on the union just makes me ill. Where is the accountability? I still see management teams in place that in the last several years alone have lost close to $6 billion between the FIAT and Fuji ventures. Market share has fallen ten percentage points in the last ten years. Stock performance is abysmal. Open discussion of impending GM bankruptcy occurs almost daily in the media. And still no change to the coaching staff and philosophy? It defies logic.
Ultimately, the heads of the company are responsible for the success or failure of that business. However, they usually set it up such that they are never accountable for the failures, only the successes.
Registered User
Joined: Nov 2000
Posts: 2,139
From: Commerce, mi, USA
Re: Interesting article about GM unions and management
Stating facts for what they are is no crime. Allowing these corporate curs to continue blaming working stiffs for incredible management ineptness, without retort, is.
Registered User
Joined: Feb 1999
Posts: 2,947
From: Springfield,OH. U.S.A.
Re: Interesting article about GM unions and management
These moves gave GM huge paper profits, which it used in part to make acquisitions it had no idea how to run in other industries. But the results also allowed Smith to brag to the Wall Street Journal, in December of 1988, that GM planned on seriously increasing its dividend payout if earnings hit $14 a share. Two months later GM shelled out $300 million in dividends and, for the first time in more than 30 years, split its stock two for one.
What no one knew then was that Roger had been cooking GM’s books. He even prepared false financial data for his board of directors’ meetings — and he wouldn’t let board members take it home, so they couldn’t unmask the deception. Along the way, and again unknown to GM’s workers, their pension and health care programs were being seriously underfunded — while their stock options made Smith and others rich.
What no one knew then was that Roger had been cooking GM’s books. He even prepared false financial data for his board of directors’ meetings — and he wouldn’t let board members take it home, so they couldn’t unmask the deception. Along the way, and again unknown to GM’s workers, their pension and health care programs were being seriously underfunded — while their stock options made Smith and others rich.
All of this Machiavellian Manuvering, just to save face on Wall Street and put money in some pockets...elite..
Whatever happened to just telling the TRUTH, and keeping things out on the table...secrecy is the enemy, just breeds animosity, if there's nothing wrong going on, there's no reason to hide things from employees...true?
Hell, even the Union exec's keep contract talks from the "body" until things are ready for a vote...it's time for a change.
Thread
Thread Starter
Forum
Replies
Last Post
NewsBot
2010 - 2015 Camaro News, Sightings, Pictures, and Multimedia
0
May 24, 2015 10:50 AM
cmsmith
2010 - 2015 Camaro News, Sightings, Pictures, and Multimedia
6
Mar 11, 2015 09:55 PM
NewsBot
2010 - 2015 Camaro News, Sightings, Pictures, and Multimedia
0
Feb 6, 2015 05:00 PM