Going Down For The Count

If there weren't so many real lives damaged, reading the stuff Alfred Sloan and Walter Reuther wrote back in the 1950's would be almost comical.  Reuther had a few good ideas, and some of his thinking even aligns pretty well with Toyota's principles - making people a fixed cost, for example.  For the most part, however, his thinking was silly. Of course, Sloan would have none of it, and in "Adventures of a White Collar Man", he talks at great length about the workers as if they were children who needed the guidance of his wise, firm hand.

They were able to go on as they did because they lived in a fantasy world.  They had no competition.  Ford and Chrysler were managed in exactly the same manner as GM, and, of course, the UAW was in both places.  GM's 'competition' was two smaller versions of itself.  The fantasy ended in the late 1970's when Toyota showed up and, for the first time, the systems Sloan and Reuther put together were put to the test.

Since 1979, the UAW has lost almost a million jobs (the chart came from the Detroit News):

Since Sloan and his mentor, Pierre DuPont, viewed business as a conflict between capital and labor, and the ROI model was designed to be the vehicle to be sure that all decisions were driven by the best interests of capital at the expense of labor, they should have won the war.

They didn't.  Here is GM's stock price over the same period:

The worth of a share of GM stock is about half of what it was when Toyota showed up.

(Note that the short lived upward spikes on the long downhill slide are essentially what GM has to show for the legacy costs.  They would cut a deal to avoid a strike, sending the stock price up for a few months, but the trend never changed much over the long haul.)

So the result is that Reuther and the UAW have lost about 2/3 of their members; while the investors have lost about half their money.  It seems pretty clear that the bottom line is a lose-lose deal.

It also seems even clearer that the adversarial assumptions these two great organizations have built themselves upon are terribly flawed.  It seems crystal clear that a new paradigm of the relationship between the folks on Wall Street and the folks who work in the plants is desperately needed.

Somewhere out there is the mathematician who can look at these charts and figure out when the trend lines will reach zero. Even a statistical idiot like me can see that it won't be too long before that date hits.  Yet the news from the two of them shows that nothing has changed.

GM says their salvation can only come through pummeling the UAW harder - more layoffs, more plant closings, more wage and benefit cuts.  The UAW, true to form, is threatening to strike. The labor versus management rancor in Deroit is as bad today as ever in modern history.

Picking sides is pointless.  It is like watching two great prizefighters who have beaten each other up so badly that neither one of them has the strength left to swat a fly; but they hear the bell and still come out flailing at each other out of sheer instinct.

Unless and until they stop and figure out that they need to go all the way back to square one and redefine their values - seriously get to the root cause of the impending disaster - there will be no changing the trends, and the zero date will soon come.