Just What Did Go Wrong in Detroit?

There are two articles by Malcolm Gladwell, staff writer for The New Yorker, that need to be read, or reread, to understand why the American automobile industry is failing.

The first article, Big and Bad, January 2004, explains the rise of the SUV, a way around passenger car safety standards and gas mileage requirements, as well as the path to enormous profits that GM, Ford, and Chrysler did not reinvest into developing safer or more fuel efficient cars, or use to pay down pension obligations. We will have to await history or investigators, hopefully, to know where the money went and why loopholes were the precipitating factors in driving Detroit decision-making.

The second article, The Risk Pool, August 2006, reveals the relationship between the automobile industry and pensions and health care benefits. After World War II, the United Automobile Workers (UAW) wanted to spread the risk of pensions regionally, so that workers could move with their pensions if they went from car manufacturer to parts suppliers and back again to a different manufacturer. However, the car executives were afraid of losing control and insisted that only the car companies should pay for pensions and health care. The car manufacturers could have gone for national health insurance, something that President Truman first offered in 1945.

In 1945, when President Truman first proposed national health insurance, they [the unions] cheered. In 1947, when Ford offered its workers a pension, the union voted it down. The labor movement believed that the safest and most efficient way to provide insurance against ill health or old age was to spread the costs and risks of benefits over the biggest and most diverse group possible. Walter Reuther [head of the Union], as Nelson Lichtenstein argues in his definitive biography, believed that risk ought to be broadly collectivized. Charlie Wilson [president of GM], on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners. In his view, companies themselves ought to assume the risks of providing insurance.

On the day that Rick Wagoner, president of General Motors, was asked to resign, we need to understand how these corporate executives made bad decisions that rumble through our economy and affect all of us. However, there still appears to be no accountability, not on Wall Street, not reflected in corporate salaries, not in courts of law. Perhaps I am hyper-paranoid, midway through The Shock Doctrine by Naomi Klein, a book I highly recommend. (The tag line is Information is Shock Resistant. Arm Yourself.) But these times require an informed and focused citizenry, not folks longing to shop again, but folks who want to participate in democracy.