In April 2010, General Motors Chairman Ed Whitacre announced that GM would pay back $8.1 billion in government loans. It was greeted by cheers from employees and no doubt from U.S. Treasury officers as well.
Of course, much of the $52 billion loaned to General Motors by the federal government - and the $1.4 billion loaned to General Motors by the Canadian government - has been converted to stock, which you and I as taxpayers own. This may be a good investment, for it appears that General Motors has learned its lesson.
Quite frankly, that lesson needed to be learned. In 1983, when I moved to Tarrytown, N.Y., I could see much of the Tarrytown General Motors plant as I boarded the Hudson Line for my daily commute into New York City.
The plant was the oldest continually operating automobile factory in the country. Constructed in 1900, the Mobile Company of America built the first steam-operated automobiles there. In 1903, the facility was bought by Benjamin Briscoe, who used it to start the Maxwell-Briscoe Motor Co. The Maxwell brand - some of you may remember that Jack Benny drove one - survived and production was moved to Detroit. The Tarrytown plant, though, was sold to William C. Durant in 1914 as a site to produce his new Chevrolet automobile.
After more than 80 years of continuous operations, the plant was closed in March 1996. Much of the rationale for closing the plant was that it was expensive and difficult to operate a manufacturing facility in what had become a bedroom community for New York City. But the reasons were deeper than that, and I saw them firsthand.
Steeped in the history of the Hudson River, Tarrytown had always been tied commercially and for other reasons to the river. One of the more pleasant attributes of the town was several boat clubs. I docked a small 20-foot day sailor at the Washington Irving Boat Club, located almost under the Tappen Zee Bridge, and I enjoyed many pleasant days sailing on the river.
The Washington Irving Boat Club contained two classes of members: "B" members, like myself, had few mechanical abilities, and were more than pleased to pay higher annual dues than did the "A" members. "A" members could literally fix about anything at the club, and did so, on a regular basis.
The commodore of the club was always present, even on weekdays, and even though he had a full-time job at the Tarrytown Plant. He was a GM foreman.
"Commodore Jack," as we called him, kept a walkie-talkie on his belt - there were no cellphones in 1983. When there was a problem at the plant, he would be called, report in, and then quickly return to the job he obviously loved the most, keeping the Washington Irving Boat Club in good order. As a foreman, and a longtime employee, he no doubt was making a good hourly wage, and of course enjoyed the wonderful benefits provided to all GM employees.
It was obvious that Jack's approach to work, and that of his management supervisors, who allowed him to work part time while pulling down full-time pay, was problematic. Instead of addressing these issues, GM officials were spending significant amounts of time in Washington lobbying for heavy tariffs on Japanese cars to stave off competition. The GM plant employees backed this strategy 100 percent. There were signs in the plant's parking lot, such as, "This parking lot is reserved for American vehicles only."
Even though high tariffs made Japanese cars more expensive, their quality clearly surpassed that of American automobiles in the early 1980s.
I wanted to support my GM neighbors, so I bought a slightly used 1979 Buick Skylark, which had been manufactured at the Tarrytown plant. It was, without a doubt, the worst car I have ever owned. Among the car's idiosyncrasies was that the headlights would turn themselves off without warning. This usually occurred on a dark road in the middle of the night.
The fact that a foremen in a General Motors plant could physically leave the facility for hours at a time during the workday and still draw a salary and benefits, should have told me not to buy the car. The loss of quality and productivity, coupled with the tremendous increase in benefits awarded to GM employees, created a tsunami that broke when the Japanese tariffs were lifted. At the same time, GM's cost of doing business had skyrocketed. By 2005, for example, $1,300 of the price from every GM car sold went to pay for the health care benefits of its retirees.
The wrenching recession of 2008, from which we are still recovering, was an awful experience for the country and for many GM employees. If there is a silver lining today, it is that American companies have learned to do more with less. American automobile workers today are significantly more productive than they were in 1983.
The quality of American automobiles has increased significantly, and workers take much greater pride in them. This phenomenon bodes exceedingly well for the future, of not only car companies, but the American economy in general.
American taxpayers continue to own some of General Motors. If you hold retirement accounts, you probably own even more. With our help, GM is clawing its way back to prosperity and to its rightful place as one of the best car companies in the world.
Hopefully the "Commodore Jacks" of the world, and the managers that facilitated their approach to work, are sailing off into the sunset.
MICHAEL A. MacDOWELL is president of Misericordia University in Dallas, where he occasionally teaches economics. Would you like to write for IN THIS CORNER? Contact us at business@timesshamrock.com.