The Shangri-La security dialogue is over. Bigwigs from all over the region came to the conference, including Australian Prime Minister Kevin Rudd. All the major media outlets piled in, such as the New York Times, AP, and dozens of others from Asia, Europe, and the United States. The dialogue is already well covered in the media, so I'll write mostly about topics that likely will not make the press.
One matter that you will see in the press is that North Korea is the elephant in the room. Secretary Gates has made it clear that we have no intention of rewarding bad behavior, as we have done in the past with North Korea. Many readers seem to hold a special disdain for President Obama, and I actively campaigned for McCain, but I get the feeling that Obama is tougher and proving wiser than many people seem to think. I do not detect that we are slinking away from North Korea. It seems as though we are going to have some sort of showdown, which hopefully will all be through diplomacy. I heard Secretary Gates say that a nuclear armed North Korea is not in the cards. (Not verbatim but that was the gist.)
I asked an extremely high defense official if he thought North Korea would attack the United States, and he said they are crazy, but not that crazy. Judging by comments that I pick up here and there, it's clear that our government views North Korea in the same light that most people do: the North Korean leadership is completely nuts. That's the patois, and it's actually how American officials will sometimes put it.
On the political front, it's fascinating that the United States is such a global matchmaker. Many people think the world hates us, but I would say we have more allies than any nation has ever had in the history of mankind. All of the countries represented here have good relations with the United States, but many or most have little or no relations with each other. This is also true in the Gulf States in the Middle East. The United States has to pull all these countries together just so they will talk with each other on defense issues.
The architecture of the relationships has been likened to a wheel. The United States is the hub, and we have bilateral relations, like spokes, with just about everybody (other than a few countries such as North Korea, Iran and Cuba). But the United States wants to be less of the hub and wants these folks to cooperate with each other. So here we are: Global matchmaker. And the senior folks here, including Secretary Gates, are making it clear that if we unite against North Korea's nuclear ambitions, we can work as a team with far greater horsepower. So part of the talks have been centered around developing a common approach and a common message. The particular talks that most interested me (between Japan, South Korea and the United States) were secret so I didn't get in to hear, but I know that Secretary Gates had the Japanese and the South Koreans in the same room for about an hour. Read the rest.
A fascinating perspective from one well qualified to have a perspective.
On Jan. 21, 1988, a General Motors executive named Elmer Johnson wrote a brave and prophetic memo. Its main point was contained in this sentence: We have vastly underestimated how deeply ingrained are the organizational and cultural rigidities that hamper our ability to execute.
On Jan. 26, 2009, Rob Kleinbaum, a former G.M. employee and consultant, wrote his own memo. Kleinbaums argument was eerily similar: It is apparent that unless G.M.s culture is fundamentally changed, especially in North America, its true heart, G.M. will likely be back at the public trough again and again.
These two memos, written by men devoted to the company, get to the heart of G.M.s problems. Bureaucratic restructuring wont fix the company. Clever financing schemes wont fix the company. G.M.s core problem is its corporate and workplace culture the unquantifiable but essential attitudes, mind-sets and relationship patterns that are passed down, year after year.
Over the last five decades, this company has progressively lost touch with car buyers, especially the educated car buyers who flock to European and Japanese brands. Over five decades, this company has tolerated labor practices that seem insane to outsiders. Over these decades, it has tolerated bureaucratic structures that repel top talent. It has evaded the relentless quality focus that has helped companies like Toyota prosper.
As a result, G.M. has steadily lost U.S. market share, from 54 to 19 percent. Consumer Reports now recommends 70 percent of Fords vehicles, but only 19 percent of G.M.s.
The problems have not gone unrecognized and heroic measures have been undertaken, but technocratic reforms from within have not changed the culture. Technocratic reforms from Washington wont either. For the elemental facts about the Obama restructuring plan are these: Bureaucratically, the plan is smart. Financially, it is tough-minded. But when it comes to the corporate culture that is at the core of G.M.s woes, the Obama approach is strangely oblivious. The Obama plan wont revolutionize G.M.s corporate culture. It could make things worse.
First, the Obama plan will reduce the influence of commercial outsiders. The best place for fresh thinking could come from outside private investors. But the Obama plan rides roughshod over the current private investors and so discourages future investors. G.M. is now a pariah on Wall Street. Say farewell to a potentially powerful source of external commercial pressure.
Second, the Obama plan entrenches the ancien régime. The old C.E.O. is gone, but hes been replaced by a veteran insider and similar executive coterie. Meanwhile, the U.A.W. has been given a bigger leadership role. This is the union that fought for job banks, where employees get paid for doing nothing. This is the organization that championed retirement with full benefits at around age 50. This is not an organization that represents fundamental cultural change.
Third, the Obama approach reduces the fear that impels change. The U.S. government will own most of G.M. It would be politically suicidal for the Democrats, or whoever is in power, to pull the plug on the company now or ever. Therefore, the current managers can rest assured that they never need to fear liquidation again. There will always be federal subsidies for their own mediocrity.
Fourth, the Obama plan dilutes the companys focus. Instead of thinking obsessively about profitability and quality, G.M. will also have to meet the administrations environmental goals. There is no evidence G.M. is good at building the sort of small cars the administration demands. There is no evidence that there is a large American market for these cars. But G.M. now has to serve two masters, the market and the administrations policy goals.
Fifth, G.M.s executives and unions now have an incentive to see Washington as a prime revenue center. Already, the union has successfully lobbied to move production centers back from overseas. Already, the company has successfully sought to restrict the import of cars that might compete with G.M. brands. In the years ahead, G.M.s management will have a strong incentive to spend time in Washington, urging the companys owner, the federal government, to issue laws to help it against Ford and Honda.
Sixth, the new plan will create an ever-thickening set of relationships between G.M.s new owners in government, management and unions. These thickening bonds between public and private bureaucrats will fundamentally alter the corporate culture, and not for the better. Members of Congress are also getting more involved in the company they own, and will have their own quaint impact.
The end result is that G.M. will not become more like successful car companies. It will become less like them. The federal merger will not accelerate the companys viability. It will impede it. Weve seen this before, albeit in different context: An overconfident government throws itself into a dysfunctional culture it doesnt really understand. The result is quagmire. The costs escalate. There is no exit strategy.
Decades of dumb decisions helped send General Motors to a bankruptcy court yesterday, but one stands out.
The year was 1998, and the United Auto Workers was striking at two factories in Flint, Mich., that made components critical to every GM assembly plant in the country. The union was defending production quotas that workers could fill in five or six hours, after which they would get overtime pay or just, you know, go home.
Most strikes are forbidden during the life of a labor contract, so to provide legal cover the union started filing grievances. GM lawyers contended the walkouts violated the contract anyway and drafted a lawsuit -- the first by the company against the UAW in more than 60 years. But GM's labor-relations department freaked out because the lawsuit would antagonize the union.
Just think about that. The union had shut down virtually all of GM, costing the company and its shareholders billions of dollars, and yet the company's labor negotiators were afraid of giving offense. After heated internal arguments, the suit was filed and GM seemed on the verge of winning. But the company settled just before the judge ruled.
UAW members marched victoriously through downtown Flint. GM executives who advocated a tougher stand got pushed out of the company.
The picture of a heedless union and a feckless management says a lot about what went wrong at GM. There were many more mistakes, of course -- look-alike cars, lapses in quality, misguided acquisitions, and betting on big SUVs just before gas prices soared. They were all born of a uniquely insular corporate culture.
The GM bailout probably will cost close to $100 billion, counting money from the governments of the U.S., Canada and Germany. On paper, the new company should emerge from Chapter 11 fully able to compete in the brutally competitive auto industry. Whether it will actually prosper is far less certain, but some things are beyond dispute. Bankruptcy didn't have to happen and the fact that it did happen is incredibly sad given GM's many contributions to American society and culture.
General Motors invented the modern corporation by developing the concept of giving operating executives power and responsibility to run far-flung operations subject to central financial control. While Henry Ford invented mass manufacturing, GM's long-time president and chairman of the board, Alfred P. Sloan Jr., developed mass marketing: a "car for every purse and purpose," as he put it in the company's 1924 annual report. This meant a hierarchy of brands ranging from practical Chevrolets to prestigious Cadillacs. GM's industrial might helped win a world war and made America rich in its aftermath.
For half a century, between the 1920s and the 1970s, GM seemed to have an instinctive feel for what Americans wanted before consumers themselves even knew it. Chrome, tail fins, muscle cars and even the first catalytic converters that let cars run on lead-free gasoline were developed at GM.
But the company signed generous labor deals during the 1970s, including the right to retire after 30 years with full pension and benefits, partly because it believed the contracts would cripple its smaller competitors, Ford and Chrysler. Then along came Honda, Nissan and Toyota, which didn't have to deal with labor contracts at all. That was the beginning of the agonizing decline.
This fate could have been avoided with better foresight and less hubris, but by 18 months ago bankruptcy was inevitable. GM's U.S. market share had declined to 22% from 52% in the early 1960s. There were too many brands, too much debt, a cumbersome union contract as big as a phone book, and an enormous dealer network built for the glory years of yesterday instead of the market share of today.
#2
Actually, the seeds of GM's demise were probably sewn in the 1950s. I highly recommend "On a Clear Day You Can See General Motors" by Patrick Wright, who was writing for John DeLorean (pre-cocaine dealing days). It's a quick read, and it's obvious in retrospect that plenty of folks had a clear-headed notion of what ailed the automaker, but it was the corporate culture that prevented anyone who could buck the trend from making it to the top.
#3
Actually, GM planning include excessive production of SUVs and large trucks, because there were larger profit margins on same. When personal credit dried up, they were left with carrying costs for inventory, and there was no scenario in which those liabilities could be covered. I suppose good managers could have predicted the collapse of the financial system.
UAW concessions that GM demanded would have reduced costs by only 1%. The UAW had agreed to same. It is true that most Rantburg readers probably work 240+ days per year, while auto workers take full wages for working only 180. Drastic change is warranted. But administrative practises at GM didn't contribute to the economic crisis. And Obama's Green-Car initiative will likely add to the unsold inventory problem.
#4
And Obama's Green-Car initiative will likely add to the unsold inventory problem.
I agree Plat. I suspect the entire organization is now on 'life support' awaiting the decision by someone to pull the plug. The GM dealerships that survived the purge of Republican doners will be moving swiftly to secure Japanese and Korean franchises as safety nets. Buying a US Gov't automobile will likely be about as popular as buying US Savings Bonds, maybe even less.
#5
My last several cars have been GM. Never had a problem w/ any of them. However I am unlikely to do so again. Not after $50+ billion in taxpayer subsidies to GM and its various carcasses before this all over.
Posted by: ed ||
06/02/2009 14:06 Comments ||
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#6
My father worked for General Motors as a metallurgist for the last 16 years of his working life. Basically, his job was to find bad parts coming off a machine and figure out what to do about it.
One of his pet peeves was trying to convince the production line guys that a production quota meant not just so many parts produced, but so many *usable* parts before you could sit around and play cards for the rest of your shift.
#10
GM has had a dysfunctional corporate culture ever since, oh, when I learned to walk. (In other words, 1962.)
Posted by: Mike ||
06/02/2009 16:35 Comments ||
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#11
...In 1993 I went to a Chevy dealer in Akron to look at what was then one of the new Lumina minvans. My brother (a 24 year GM employee who loses everything next year, BTW, because his plant is being closed and he's management) said he would set me up for 'A Plan' (employee discount). I went in - at high noon on a Saturday, mind you - and saw nothing and no one save for one salesman in his office, feet up on the desk and talking on the phone. After he continued his conversation for a moment, he stopped talking and looked at me like I had just s@it in the middle of the sales floor and asked me what I wanted. I asked to talk about a Lumina van. His response was to write a price on a piece of paper, toss it across the desk to me, and tell me to take it or leave it, then go back to his phone conversation. I walked out and went down the street to a Chrysler dealer, where I told the salesman I could go A Plan through GM - give me a reason NOT to. The Plymouth I bought was one of the two best cars I've ever owned. But since that moment, I have steadfastly refused to even go near a GM dealer. I know there are many good and reliable dealers and salespeople out there, but this one and so many like them are also a major reason GM is face down in the gutter this morning.
PS - the Chevy dealer is still open and is NOT on the list of franchises getting the ax.
Mike
Posted by: Mike Kozlowski ||
06/02/2009 16:47 Comments ||
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#12
SteveS
Been there done that. Made quota then sat around 'til the whistle blew. Also enjoyed the 18 day PAID maintenance shutdown each July and the 9 paid Christmas shutdown days. And the 12 sick days per year, the easy to defraud Long Term Disability, the smoke break every hour on the line, the up to 12 weeks vacation, the near wholesale car prices, the double time, the pension after 25/30 years, the family preferences in hiring, somebody stop me...
Posted by: Uloluns Scourge of the Bunions1692 ||
06/02/2009 17:27 Comments ||
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#13
Are you saying you were in sales, or worked on an assembly line Mr. Bunions? Where was that?
#14
GM is no different from Ford or Chrysler except for being bigger. That business model can't survive and everyone knows it. So WHY have we (the taxpayers) been shoveling tens of billions of dollars into it for the last six months? Follow that money - it points somewhere.
"Too big to fail?" Then too big to BE!
Much as I'd like Ford to survive (because it has not been bailed out by yours truly), it can't happen. First, it still has to compete against Toyota et al, and it can't. Second, it has to compete against Government Motors, who has TWO vested interests in seeing Ford fail - to prove Obamanomics works and because Fords single biggest problem (UAW) has an overwhelming interest in GM.
#15
. Second, it has to compete against Government Motors, who has TWO vested interests in seeing Ford fail
The Feds can force Ford to fail using their power, but they cannot force GM or Chrysler to succeed.
#16
and even the first catalytic converters that let cars run on lead-free gasoline were developed at GM
It's plain the author doesn't know shit about engines.
In order to run unleaded the exhaust valves had to be made of entirely different steels, hardened, and aluminum coated (On the sealing faces) in order not to melt, As well the piston rings also were made with a strip of softer metal sandwiched between twin hardened wearing surfaces as a built in lubricant, the Catylitic converter was only to super-clean the exhaust and has nothing to do with the actual running and life of the engine.
Lead was used mostly as a cushioner and sealer for the very hot moving parts, camshafts also had to be reground to allow valves to settle in place gently and not 'click' into place. a 'downramp' sorta.
Much more, but you get the point, engines run fine without all the government crap on them.
Posted by: Frank G ||
06/02/2009 21:54 Comments ||
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#18
Worked as a tool engineer in the Oshawa Truck Plant for 38 years. Seen it all. Retired two years ago. Now the plant is closed.
Turns out in 1992 GM and the Province of Ontario worked out a deal to help large companies "to big to fail" relax their pension contributions. In return, the companies paid a modest premium into a provincial insurance scam plan. Turns out the insurance is as bankrupt as GM.
Word is the bulk of the Ontario bailout is destined to top up pensions, although no politician will admit to such an arrangement.
Seems like political meddling exists on both sides of the 49th.
Sunday's confrontation between an armed Hamas cell and Palestinian Authority policemen in Kalkilya shows that the Islamic movement still has a military presence in the West Bank - one that it is hoping to use to topple Mahmoud Abbas's regime there.
PA security officials said the two Hamas operatives who were killed in the clash, Muhammad Samman and Muhammad Yassin, headed a cell that possessed large amounts of weapons, including explosives and automatic rifles, some of which had been hidden in a basement of a mosque in the city.
The weapons, according to the officials, were supposed to be used by Hamas against members of the PA security forces and Fatah and PA officials. The officials revealed that Hamas members had long been collecting information about PA security officials and installations in the context of what they alleged was a scheme to stage a "coup" similar to the one that the movement carried out in the Gaza Strip in the summer of 2007.
But while the elimination of Hamas's Kalkilya cell may have foiled or hindered the movement's attempts to undermine the PA, the incident is seen as the final nail in the coffin of Palestinian unity talks.
Over the past few months, the Egyptians have been working very hard to convince Hamas and Fatah to end their differences and agree on the formation of a new unity government. At least four sessions of negotiations between the two parties have ended in failure. But this did not dissuade the Egyptians from pursuing their efforts. Omar Suleiman, head of Egypt's General Intelligence Service who has been overseeing the talks, had summoned representatives of the two parties to another [and final] session of talks in Cairo in the coming days. Suleiman was hoping to employ heavy pressure on Fatah and Hamas to end their power struggle and sit together in a unity government.
Hamas and Fatah officials agreed on Sunday that it would be "almost impossible" under the current circumstances to resume the unity talks in Cairo. Hamas representatives said they were seriously considering pulling out from the talks, while Fatah accused the Islamic movement of declaring war on its men in the Gaza Strip.
Hamas leaders and spokesmen are now openly calling on their supporters in the West Bank to rise up against Abbas and his prime minister, Salaam Fayad. Some went as far as accusing the two of high treason for collaborating with Israel - an allegation that is normally punished with death in the West Bank and Gaza Strip.
Hamas is convinced that the killing of its men is one of the results of Abbas's recent visit to Washington, where he held talks with US President Barack Obama, and presented him with a "detailed plan" to wipe out the movement.
Hamas also believes the incident in Kalkilya, as well as the ongoing crackdown by the PA security forces on Hamas supporters in the West Bank, should be seen in the context of efforts by Abbas and Fayad to show Israel, the US and the EU that they are fulfilling their obligations under the road map by fighting terrorism.
Yet while Abbas and Fayad may win words of support from Jerusalem, Washington and European capitals for joining the war on Islamic fundamentalism, it's likely that the two are almost certain to lose points among their own constituents. Many Palestinians have long been drawing parallels between the two men and the former pro-Israel South Lebanon Army headed by Antoine Lahad.
Many Arab media outlets refer to the PA security forces in the West Bank as the Dayton Forces, a reference to US security coordinator Keith Dayton, who has been entrusted with overseeing the reconstruction and training of these forces to prevent Hamas from extending its control beyond the Gaza Strip.
Judging from the actions and fiery rhetoric of both sides, it's obvious that Hamas and Fatah are far from achieving any form of reconciliation between them. Talk about reconciliation has, for now, been replaced with talk about confrontation and bloodshed.
Posted by: Steve White ||
06/02/2009 00:00 ||
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A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
