October 8, 2009
Well I am back in San Francisco (I should get an apartment here–if anyone can actually afford to live here). Reading the Henry Ford book, about half-way done. One of the key insights thus far is that automobile companies enjoyed an exalted status–sort of like tech companies like Microsoft or Apple enjoy now. I am not sure that the car companies have the same cache now. While most people understand the economic consequences of Ford or GM failing, I don’t think there is the same emotional reaction now as ten or twenty or fifty years ago would have engendered.
For example, GM is undergoing just a disastrous turn of events. The Saturn deal is either dead or close to it, Hummer and Opel deals are sputtering, but while people are aware of it, there just does not seem to be any real sadness amongst the American people for the decline of this iconic American company. OK, so the Saturn brand is only about 15 or 20 years old, and was never all that beloved (although it is odd that it never really took off). I don’t remember the last time I saw an Opel, and Hummers? Hardly an American classic. But it is the lack of any real national feeling about GM that shocks me. Perhaps corporations have some life-cycle in anthropomorphic terms–that is, while they can continue in perpetuity legally, maybe there is an expiration date on their pre-eminence. I realize that I am engaging in the most loose analysis, not grounded on any empirical data, but in thinking about other companies that had this sort of status, I can think of a number that have this sort of 75-year lifespan.
What would Mike O’Malley think of this? Is this important/interesting, or just a stray random musing? I think the former, but invite comments.
Once upon a time I drove nothing but GM products, but have been hooked on foreign cars for years. I even invested in Toyota, for which fact I am thankful.
My new Toyota was made in Tennessee assembled by Amreican workers, and Toyota stock is owned across the world. What makes a company American any more?
Your thoughts are not surprising, yet I think this has been a long time coming. There is of course the story of GM as an individual company, its rise under the leadership of Alfred Sloan and its recent decline. This linear story though also is evidence is the broader story of the corporation. Under Sloan, and through the 1950s, GM was a model organization and a significant part of the economic story of the US. Yet a number of forces (rigid organization? unions demands? ineffective marketing? alternatives attractive to consumers? others?) offer glimpses into how GM became less effective as other corporate structures rose to be models for other businesses and as suppliers of consumers demands.
For my take, the story of GM’s decline (indeed, of the entire US automobile industry’s decline) is about all this, but also about changes in the structure of the American economy. It is now more globalized, with greater international trade (resulting from lower transaction costs and a political climate that until now recognized the benefits of trade). Moreover, the world is now saturated with cars, but not with other goods, and that is where the new economic activity is – in computers and technology. Ford, GM, and Chrysler (indeed, even Toyota, Honda, et al) will be significant, but not the significant, players in the American economy – instead, they will have to be what most companies are in a mature market; well run.
I grew up in Michigan and most of my family still lives there. The demise of the US auto industry, and its impact on Michigan is truly amazing. Amazingly depressing. My home town, Grand Rapids, was never very dependent on the auto industry.
What is strange is that Grand Rapids has one of the more healthy economies of any mid-size city in the region. The downtown area, for those who have never been there, is surprisingly vibrant. The historic housing district I lived in more than 30 years ago has expanded rather than contracted. All the old factories along the river have gone condo.
I attribute this to the massive investments made by some home-grown billionaires, Devos and VanAndel (the owners of Amway) and Fred Meijer (the owner of Meijer’s Supermarkets, a huge Midwestern chain). These home-boys decided to spend their billions in there home town. Last visit I witnessed the completion of a $1illion investment in medical construction and research facilities near downtown. Impressive even compared to larger cities.
For contrast check out Bentonville, Arkansas. As far as I can tell the Walton’s have spent $0 on their hometown. So what is the difference? Why did the Dutch, Calvinist’s of Grand Rapids refuse to let their town die, even when it was probably a better investment to look around at other places if they wanted to diversify into health care? Why did Van Andel fund a cancer research center with a several billion dollar trust? Is there some cultural factor driving this, since it is pretty clearly not a simple economic argument.