How can we prevent the next Katrina, General Motors?

[Pat Coyle]

General Motors filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.

The fallen icon of American industrial might will get $30 billion of additional tax payer money. That's on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans. The federal government to take a 60 percent ownership stake in the new GM.

How did we come to this? Experts have long known that GM could not sustain its business model under rising costs and declining sales. Predictably, the current economic storm finally brought the car maker to its knees, prompting the Government to take unprecedented measures to bailout the business.

Can you say "preventive maintenance?"

The sad and controversial situation in Detroit is similar in some respects to Katrina, and other tragic Gulf Coast hurricane rescue operations. In New Orleans in particular it had long been known that the existing levy system would not protect the city from a large storm, but sufficient investments in repair and maintenance were not made in advance. Once again, the storm came, and since 2005, the Federal Government has pledged $116 Billion dollars to the region's repair and rebuilding efforts. But the problem isn't really solved.

Question of the day: Is an ounce of prevention worth a pound of cure? Think about our health care system. We know that living healthier lifestyles will reduce the costs, yet we continue subsidizing smoking, drinking and overeating. This is just one more example. Will the United States ever shift towards an emphasis on preventive maintenance in every area of our society? Or are we doomed to see history repeat itself over and over and over? Please share your thoughts here

[Steve Stuck]

Jeff, I heard a stat one time saying labor unions have cost consumers/companies and net loss job creation our economy close to $11 Trillion dollars. This study was done over the 50 years you mentioned above. Have you seen this study?

[Jeff Bowe]

Not that study specifically, but if you plotted labor on a supply/demand curve, found the market equilibrium rate, and then plugged in their artificial rate, and calculated what is called deadweight loss, the result you would get is what is talked about in that article. The concept is simple, the math would be a bit cumbersome (but great for an economics Ph.D. dissertation.) Off the cuff, if you say that we have averaged 5 million vehicles per year, which is very low when you look at all vehicles, and labor is easily $1000 per vehicle too high (health insurance alone is that much too high), and then look at 50 years, just in the auto industry the number is $250 billion in direct labor cost. I would say $11 trillion is not unrealistic at all.

[Brian Rowe]

So given this discussion, what is a business to do? What does this teach?
That we shouldn't start private sector business, that the government will regulate to such an extreme that consumers will no longer want our products? It certainly teaches that is possible. However, we should create businesses with help support the government in times of natural disaster because they will be unable to provide for that event when it occurs. A friend of mine has done just that, and started a business to help support these crisis.

[Jeff Bowe]

We should start private business because only private business can create wealth. The government cannot create wealth, it has no mechanism to add two components and have the sum equal more than the parts. We need wealth to create jobs and the tax base we need to pay our way out of this.

What we need is a government that is supportive of business and job creation, not one that places punitive taxes and excessive regulation which places the cost above what the market values the product at, so that we are on the wrong side of the total revenue curve (where marginal cost by dictate exceed marginal value to the next customer) which will drive volume down.

Business that supports the government works, I'd just prefer it not be paid for out of taxes but then, I am without a doubt against high taxes and the current punitive system we have that allows too many people on both ends of the income spectrum too many ways around taxes (think: tax loops on the top, and illegal immigrants and cash business on the bottom).

[John Kohlmeyer]

We can prevent them both with nuclear weapons.

[Kevin Feldman]

Put customers ahead of profits.

I worked for General Motors during the 80s. In my position, I attended "build meetings" where engineers, attorneys, actuaries, and executives would meet regularly to discuss advanced models that have yet to be manufactured. The purpose of these meetings was to determine if the automobiles were on target for meeting the company's manufacturing deadline or "launch date." As the launch date on various new models drew closer, test engineers would bring to light defects in the cars -- some of them serious, and what it would require to correct these defects. More often than not, these defects would require a delay in the cars' launch, costing the automaker millions of dollars for every day of delay. The actuaries were on hand to determine if the potential lawsuits stemming from injuries and deaths from these defects would cost the company more than delaying the products' launch. Often the conclusion was to continue with production to meet the deadline, and face potential lawsuits.

I believe that it is this attitude of putting profits over customer safety and satisfaction that has cost GM over the long haul. The GM "Mark of Excellence" was a contradiction of the automaker's reality.

The UAW also played a big hand in the automaker's demise. As a salaried employee and non-union, I wasn't allowed to even empty my own wastebasket. A Union employee had to do it. And sometimes I waited days to have my overflowing basket emptied. The UAW did more to hamstring the automaker than help it.

All of this said, I liked GM cars. Most years GM had the other US automakers beat on style and performance. With the impending environmental guidelines, I doubt if any American cars will have a look and feel that customers want.

[Ernest Rando]

As it was so aptly pointed out by our president recently (whom I Enjoy and admire) "we are in afghanastan because we lost 3,000 people.... We don't want people in Afghanastan plotting to kill Americans (or something)" (my comments now) That is why we so readily decided to invade another country and spend billions of dollars. To put that in perspective 1,000 people die per day of smoking. (My thoughts) Did the tobacco companies diliberately set out to addict and deteriorate the health of Americans to the tune of 1.000 per day, or was that just a byproduct of their greed? does it matter, 1,000 people still die a day do to the deliberate and deceitful actions of the tobacco corporations.

Tobacco is the single greatest cause of disease and premature death...

Now to make this relevant I think the link you are trying to make above between the Human Response to Economic Conditions (as exemplified by GM) and the Human Response to a Natural Disaster was kind of the same. We Knew how to prepare, but we didn't. We know how to prevent, reduce, and rehabilitate smokers but we don't we continue to allow Corporations (that are more influential than many countries and cultures). We know what we need to do, but often we simply just don't bput forth our best effort, (myself included).

On that note Thanks for both or Your Effort, I beleive one of the many solutions to many different problems is a cultural shift in how and what we celebrate. Perhaps Effort should be more celebrated than "looking cool"?

[Steve Stuck]

Uh, don't people make the choice to smoke?

[Taylor Martin]

How can we prevent the next natural disaster? You can't, because no one knows what it will be. There are no real psychics. They are all frauds and anyone who tells you they can predict the next terrible thing is a liar. What we can do is accept that we can do what we can after it happens. We just need better people to deal with the aftermath and keep away from the greedy who will try to make money from it.

As for business, unless you're someone who can see all of the models for finance, and can steer your funds away from the unprofitable, businesses fail. Don't put all you money in one thing. GM thought large cars with low mileage would be what America wanted and not what it needed. And when it didn't provide what America needed it failed because there was no credit to shore up bad decisions. Blame it on greed, ignorance, or sheer stupidity. Give me an alternative to an internal combustion engine, to haul my act all over the country, and I'll be the first to have it.

Reinvent yourself out of your job. Create the next big thing to help all of us and whenever the next business fails, we'll all benefit. Stop whining and move forward.

Taylor