Tuesday, January 03, 2006

GM and America together slide toward calamity

"What's good for GM is good for America." I regretfully feel those words are probably still accurate today. GM stock has slid nearly 60% since its heyday, and the company is saddled with high Union wages, massive pension obligations, soaring health care costs, and a huge slump in SUV sales (brought on by higher gas prices). Will they, and correspondingly the U.S., ever get out of the pickle they are in?

See this Market Watch report for today: Stocks sliding again

Michael S. Abraham also has an interesting perspective (posted below).

Abraham is a businessman who lives in Blacksburg. "For years I thought what was good for our country was good for General Motors and vice versa."

These famous words were uttered in 1953 by Charles "Engine Charlie" Wilson, president of GM and newly nominated secretary of defense.

His statement now seems a cruel and bitter joke since GM's domestic market share has plummeted from a high of 60 percent in its heyday to less than 25 percent today, and its bond rating dropped to "junk" status.

Once a paragon of American industrial might, GM is sputtering before our eyes. If GM succumbs, it will be more a suicide than a murder. Yes, GM faces intractable employee pension and benefit issues. But worse, GM has tenaciously held to paradigms that no longer exist and continued to build vehicles that don't fit changing times and consumer tastes. Recent gas price uncertainties provide the same situation GM faced during the OPEC oil embargoes 30 years ago.

At that time, imports carved increasingly larger slices of the market pie by making fuel-efficient vehicles while GM had none.

It's déjà vu all over again today, as waiting lists grow for competitors' hybrids while GM scrambles to engineer its first high-efficiency vehicle.

As complex systems, corporations and societies are similar in that their strength and vitality ebb and flow according to the vicissitudes of the era and their abilities to react and adjust. In the fascinating bestseller "Collapse," author Jared Diamond chronicles the downfall of several past civilizations. Particularly provocative is his subtitle, "How Societies Choose to Fail or Succeed." Corporations choose, too.

In contemplating GM's "choice," one would surmise that failure was never a conscious goal; there was never that fateful board meeting where directors schemed, "Let's destroy the company."

But the result of continuing bad decisions may ultimately prove to be the same. America, too, is exhibiting the inability to adjust. In many ways, our empire suffers from the attributes and behaviors that have doomed all empires before us.

Like GM, we stumble, clueless, into the future, wondering why what worked so well before works no more. We whitewash real threats, fashion artificial realities to suit our whims, distract ourselves with banal but titillating "news," and trust good ol' American ingenuity to carry us through. But the warning signs of failure are everywhere.

First, we're experiencing military overextension. With about 5 percent of the world's population, we spend more on our military than the rest of the world combined.

As our resource needs grow beyond our domestic ability to provide them, resources must be arrogated from others, often by force.

More than any other nation, we manipulate the rest of the world according to our needs, engendering deep resentment. The hostile reaction by those exploited is straining the ability of our military to maintain enduring subjugation.

Next, we're failing to protect the environment that nurtures us. While forging the most affluent society the world has ever known, nearly every measure of environmental health is negative.
Erosion and pollution of topsoils, depletion of aquifers, rivers and mineral resources, extremes of weather and accelerated species extinctions lead the terrible list of maladies.

For decades, our assault on nature has been pervasive, but the Bush administration is fanatical in its zeal to inflict lasting damage, passionately eviscerating two generations of hard-fought environmental laws and policies.

Third is our financial crisis. It has taken but one presidential administration to turn the world's greatest lender nation into the world's greatest debtor, from the largest national budget surplus to the largest deficit.

Over recent decades, our elected leaders have conspired with corporate strongmen in wanton, domineering ways to decimate local economies: retailing, manufacturing and agriculture. Our nation's increasing disparity of wealth will breed hostility when difficult times come. Finally, our inability to prepare for our coming energy crisis will prove catastrophic. Oil in particular is destined to become increasingly scarce as we approach the peak of international production.

The smallest gap between demand and supply will usher in skyrocketing prices and plunge our nation into a miserable, lasting recession and our citizens into fits of rage and despair. The impact will spare no nation, but due to our greater dependency, America will suffer like none other.

It is the unkindest irony that the personality characteristics that define Americans--superiority, entitlement, hubris, arrogance and invincibility -- and the values -- nationalism, individualism, hedonism and capitalism -- represented the greatest strengths in our empire's emergence, but are becoming our grandest weaknesses.

These values are elemental to our collective psyche and are inviolable -- we cling to them resolutely. Like GM, America must act to meet emerging challenges, yet both seem incapable. Adjusting to new realities by becoming more sustainable and equitable will become the defining challenge of our era.

We're on a one-way street toward calamity. A U-turn is urgently in order.

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