Monday, June 1, 2009

When Made In America Meant Something (Musings on the GM Bankruptcy)

by John L. Watkins

Note: I normally try to confine these posts to legal issues related to my law practice. However, in view of the General Motors bankruptcy that is being filed today, I took a little license to go a bit astray. The following views are my own, and should not be attributed to my firm, my fellow shareholders, or my colleagues. Nevertheless, I suspect they may resonate in some circles.

Being somewhat of a "car guy," this weekend was bittersweet, to say the least. On the one hand, I watched the Mecum Auto Auctions on the HDTV Theater channel on Saturday night. Despite the somewhat dismal economic conditions, I watched automotive icons from my childhood (and before) fetch rather astonishing sales prices. When the Shelby champion from the 1960s failed to sell for $6.8 million, who would have thought that was possible? $6.8 million not enough for any car? Hey, I know the old adage that “you can sleep in your car, but you can’t drive a house,” but come on: That’s a lot of money, particularly in a severe recession! Maybe Dana Mecum worked out a deal before the end of the weekend.

On the other hand, we knew that General Motors, an American icon if ever there was one, would declare bankruptcy on Monday morning. In fact, one of the commentators at the auction noted that automobiles manufactured under the Pontiac brand could only become more valuable now that the brand is being “retired” (of course, Oldsmobile is already gone and other GM brands are on the auction block).

The entire Mecum auction experience brought back memories of my youth. I was brought home from the hospital in a 1957 Ford Fairlane (green and white) that would probably be worth a pretty penny today, but which my Dad told me had rust. I remembered other automotive mistakes my Dad made in my early youth, such as a used 1957 Cadillac convertible (pretty cool with electric windows and servo buttons and the basis for the Batmobile, but far too expensive to maintain for a young assistant college professor with kids), and a 1960s-era Vauxhall (apparently, at the time, British for “bad auto”). Vauxhall, ironically, is another part of the worldwide auto bailout situation.

By 1964, my Dad found his bearings and brought home a new Dodge (it looked like something called the Polaris based on a recent Internet search, but I am pretty sure it had another name). This car, as I remember it, represented our family’s first car that looked pretty cool (it was the Space Age, after all), and actually worked pretty well. Dad kind of became a Chrysler junkie after that for a while (he always “needed” a new car every two to three years; a Detroit dream customer), buying a 1966 Dodge Coronet station wagon (useful for hauling three boys across the country), which was replaced, eventually, by a 1971 Plymouth wagon (with a “cool” spoiler thing on the back; a “Brady Bunch” vehicle if ever there was one). I learned this weekend that, if Dad had bought a 1966 Coronet sedan with a Hemi, instead of the wagon, and had kept it in mint condition, he could have made a mint.

Dad always thought we needed two cars. After a mind numbing skate down the icy roads of the “West Bench” in Pocatello, Idaho (one of several college towns in which we lived) in the “second car,” Dad’s 1960 Volkswagen Beetle, he had second thoughts. Dad decided it was a better idea (1) to relocate to a house in town (good choice), and (2) to trade in the Beetle on a 1969 Oldsmobile Cutlass. Dad’s Cutlass was yellow and very cool looking (and would still look cool to this day), but was stripped down version with no air conditioning that actually had a “three on the column.” Had Dad instead bought a 442 with a four on the floor and kept it in mint condition, he could have also sold it for a substantial sum this past weekend to one of Dana Mecum’s clients. Yet another lost opportunity.

When I was in high school in the early to mid 1970s, everyone agreed (at least in my circles), that GM made the best cars (including the iconic Corvette, the Malibu, and the Trans Am). Chrysler made some cool cars (all the Mopar stuff), and was still known for its engineering, and Ford made Mustangs (still cool), cop cars and great pickup trucks. “Made in America” still meant something.

Having driven a Plymouth Valiant “grannymobile” in high school, then through college, and then through law school (a wonderful and loyal car with the ever-reliable “slant six” engine, but not the most exciting thing on the road), my first new car in 1982 was a Toyota Celica. It was so cool. I became a loyal Toyota owner for over twenty-five years, buying a series of Toyotas, and then an incredible (and indestructible) Lexus LS 400. I finally succumbed to automotive lust last year (I inherited it from Dad, but my bouts seem to be less frequent) and bought a Mercedes E Class Bluetec turbo diesel with all the latest technology (it is awesome).

I did have a tinge of “Buy American” guilt in buying a series of Toyota products and then a Mercedes. After all, the cars of my youth were all from the “Big Three” (but were also some of the best cars built in the world at that time). Further, my wife’s uncle Jack, a prince of a man in every respect, was a GM dealer, split his time between Detroit and Florida, and had a wonderful career and family life by every measure. He was a very personal representation of GM to me. But how could you argue with Toyota's incredible reliability and maintenance that consisted of changing the oil when needed and occasionally buying a new set of tires? For most of my adult life, Detroit's only answer has been "not quite as good" at best and "just not very good" at worst.

However, my guilt was largely assuaged when Toyota started building some of the cars I was buying in America. Honda also started building cars here. Then BMW, right up the road in Spartanburg, South Carolina, and Mercedes-Benz in Tuscaloosa County, Alabama. (Both BMW and Mercedes, in my humble opinion, should have located here in Georgia, but I may be a little biased). At least Kia is now locating a plant here in Georgia. Volkswagen is locating a new plant just outside of Chattanooga, Tennessee, near the Georgia border, which will likely result in suppliers locating in Georgia, at least if they can survive the recession.

Nevertheless, the bankruptcy of perhaps the best automobile manufacturer from the days of my youth and, until recently, the world’s leading automobile manufacturer and an American icon, does not bring happy thoughts. I am also not thrilled with the tax dollars that have been thrown at this issue, and I will never be convinced that “Government Motors” is a good idea, regardless of which political party is in power.

However, I do think we can learn a few things from this incredibly unfortunate slice of recent American history.

1. There needs to be an effort to spark a manufacturing resurgence in the U.S. It is important. We cannot continue just to sell each other services or to buy products that are made solely abroad. It is great if governments – particularly state and local governments – provide incentives to manufacturers to locate here.

2. There was a time when “made in America” meant something. Judging by the fact that international companies continue to locate operations here, including the current icons of automotive quality, there is no reason why this cannot continue to be the case. Americans can manufacture goods to compete in any marketplace; they just need the will, the product development, and the management to do so.

3. We cannot and should not shut out international investment. We must instead encourage it. If headquarters are in Stuttgart, Munich, Tokyo, or Seoul, but the plants and jobs are here, and the products are made here, that is a good thing. And if we buy components and products that our trading partners manufacture elsewhere, that is also OK.

4. Arrogance is never a good management philosophy. GM’s financial performance has been pretty awful in recent years, but management continued to insist (at least from what I saw and read) that it was on the right track. Although this had a grain of truth, and although some GM models have recently gotten raves (the Chevy Malibu and Cadillac STS, for example), GM was often on the wrong side of consumer demand. At least from Main Street (where I live), this view was nothing new. Detroit would rarely admit a mistake and seemed insular in its “outlook,” if one can even call it an outlook. GM was lucky that its customers stayed loyal for as long as they did. If there truly is to be a “new GM,” this approach will have to stop.

5. Unions, if they are to have a meaningful place at the table, have to act as a true partner of business. Under the GM deal, the auto workers will now have a huge stake. Hopefully, the unions now realize that “us vs. them” does not work and that, truly, you can kill the goose that laid the golden egg. However, it is not fair to put the blame for this at the foot of the workers. Who can object to a person trying to get the most for the fruits of his or her labor? But the overall situation – the “big picture” – has to be kept in sharp focus by all the participants.

6. Government can and should provide incentives, as noted, but needs to get out of the business of business as soon as possible. When has government ever produced anything efficiently? This aspect of the “plan” bothers me the most. The sooner “Government Motors” is out of business, the better.

As lawyers, we can help. We can help our clients do business efficiently. We can help international companies desiring to locate here and create jobs do so. We can help American clients develop new distribution channels abroad. My firm and I represent a number of domestic and international manufacturers, and hope we can play a small role in helping a manufacturing renaissance in the U.S.

We can also remind our clients that even the biggest of icons can fail. We can remind them that they do need to stay competitive and to re-invent themselves as times may warrant. And, if they need convincing, we can remind them of what transpired on today, June 1, 2009.


  1. Exterely well thought out...You might want to send it to your elected leaders and/or business representatives.

  2. Surprisingly well-thought out and constructive.