1930s

Why American car companies are in trouble

From Paul Ingrassia’s “How Detroit Drove Into a Ditch” (The Wall Street Journal: 25 October 2008):

This situation doesn’t stem from the recent meltdown in banking and the markets. GM, Ford and Chrysler have been losing billions since 2005, when the U.S. economy was still healthy. The financial crisis does, however, greatly exacerbate Detroit’s woes. As car sales plunge — both in the U.S. and in Detroit’s once-booming overseas markets — it’s becoming nearly impossible for the companies to cut costs fast enough to keep pace with the evaporation of their revenue. All three companies, once the very symbol of American economic might, need new capital, but their options for raising it are limited.

In all this lies a tale of hubris, missed opportunities, disastrous decisions and flawed leadership of almost biblical proportions. In fact, for the last 30 years Detroit has gone astray, repented, gone astray and repented again in a cycle not unlike the Israelites in the Book of Exodus.

Detroit failed to grasp — or at least to address — the fundamental nature of its Japanese competition. Japan’s car companies, and more recently the Germans and Koreans, gained a competitive advantage largely by forging an alliance with American workers.

Detroit, meanwhile, has remained mired in mutual mistrust with the United Auto Workers union. While the suspicion has abated somewhat in recent years, it never has disappeared — which is why Detroit’s factories remain vastly more cumbersome to manage than the factories of foreign car companies in the U.S.

Two incidents in 1936 and 1937 formed this lasting labor-management divide: the sit-down strike at GM’s factories in Flint, Mich., and the Battle of the Overpass in Detroit, in which Ford goons beat up union organizers. But the United Auto Workers prevailed, and as the GM-Ford-Chrysler oligopoly emerged in the 1940s, the union gained a labor monopoly in American auto factories. As costs increased, the companies routinely passed them on to U.S. consumers, who had virtually no alternatives in buying cars.

Nissan, Toyota and other Japanese car companies soon started building factories in America, followed by German and Korean auto makers. There are now 16 foreign-owned assembly plants in the U.S., and many more that build engines, transmissions and other components.

Several years ago Ford even considered dropping cars altogether because they weren’t profitable, and focusing entirely on trucks. Then in 2005, Hurricane Katrina and growing oil demand from China and India sent gasoline prices soaring and SUV sales plunging. GM lost $10.6 billion that year. Ford topped that by losing $12.7 billion in 2006. Last summer Daimler gave up on Chrysler, selling it to private-equity powerhouse Cerberus for about one-fourth of what it had paid to buy Chrysler. Last fall the UAW approved significant wage and benefit concessions, but they won’t kick in until 2010. That might be too late. GM lost $15.5 billion in this year’s second quarter, Ford lost $8.7 billion, and further losses are coming. (Closely held Chrysler, of course, doesn’t report financial results.)

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The day FDR was almost assassinated

From Adam Goodheart’s “10 Days That Changed History” (The New York Times: 2 July 2006):

FEB. 15, 1933: The Wobbly Chair

It should have been an easy shot: five rounds at 25 feet. But the gunman, Giuseppe Zangara, an anarchist, lost his balance atop a wobbly chair, and instead of hitting President-elect Franklin D. Roosevelt, he fatally wounded the mayor of Chicago, who was shaking hands with F.D.R.

Had Roosevelt been assassinated, his conservative Texas running mate, John Nance Garner, would most likely have come to power. “The New Deal, the move toward internationalism – these would never have happened,” says Alan Brinkley of Columbia University. “It would have changed the history of the world in the 20th century. I don’t think the Kennedy assassination changed things as much as Roosevelt’s would have.”

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The origin of broadcast journalism

From Nicholas Lemann’s “The Murrow Doctrine” (The New Yorker: 23 & 30 January 2006: 38-43):

There is a memorable entry in William Shirer’s Berlin Diary in which he describes – as, in effect, something that happened at work one day – the birth of broadcast journalism. It was Sunday, March 13, 1938, the day after Nazi troops entered Austria. Shirer, in London, got a call from CBS headquarters, in New York, asking him to put together a broadcast in which radio correspondents in the major capitals of Europe, led by Shirer’s boss, Edward R. Murrow, who was on the scene in Vienna, would offer a series of live reports on Hitler’s move and the reaction to it.

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