Richard Warner Online

Because I interview so many business leaders, people have started asking what I think about the auto bailout. It’s an issue I follow carefully because Dad was a lifetime employee of “Generous Motors,” which took care of its own from “womb to tomb” for decades. On January 1, his guaranteed retiree health care ends and if GM files for bankruptcy, his guaranteed pension could be materially reduced. What do you in your late ’70s when the benefits you were guaranteed throughout your working career evaporate?

No easy answers. Clearly GM needs to restructure, revisit its culture and reduce some of its brands. Buick is a well-built car, has a solid customer base of retirees and a fast growing market in China. Chevys are a solid brand, as is Cadillac.  In fairness to GM, which has slowly been remaking itself, no business can plan for or survive a 50% drop in sales that come from external market forces. And given the economy, a collapse of auto companies would take a serious unemployment and consumer confidence situation and make them worse. How much worse, no one knows because the collapse of a car company would result in higher sales at other companies.

What I do know is that GMs products and innovation fell behind decades ago and management hubris prevented it from catching up. The unions negotiated ever more generous packages that the marketplace couldn’t support. (Warner’s law: whenever a company or organization says, “where else you gonna go?,” an alternative will appear.) Management rationalized.

I think bankruptcy will eventually be GM and Chrysler’s best option, because it will cost many billions to shut down brands that need to go; rework union agreements that match the marketplace; close plants to bring capacity in line with demand. Another reason I think bankruptcy will happen because people simply won’t buy cars from Chrysler or GM in the same numbers as before given this relentless negative attention.

The CEOs of GM and Chrysler should be replaced as part of government loan programs, and if not, they should invest a significant amount of their own money in GM stock. But of course, I strongly believe that retirement (and health care) weren’t “perks”…they represent deferred compensation. There should be/should have been strong federal regulations in place that guaranteed protection for the recipients. This group should be a focus of government attention.

It’s tough, but this American tragedy has been coming for a long, long time. One line in a NY Times article summed up an important sidebar: that this mess represents the end of one aspect of the American Dream — the one company “womb to tomb” relationship between employer and employee that began with Henry Ford and has caught an entire generation of American retirees in its wake.