High Crimes and Misdemeanors in Detroit

By David L. Brown

I can’t help wondering at the mess Detroit finds itself in. Can it really be that the geniuses that run GM, Ford and Chrysler didn’t see the end coming for the giant gas-guzzling monstrosities they’ve been pawning off on us for years? Apparently not, although among any thinking persons it should have seemed obvious that change was coming and that it was high time to be prepared.

Well, obviously they didn’t foresee the future of their businesses very clearly or they wouldn’t find themselves in the deep doo-doo now. GM has announced that four major plants will be closing, and in particular ones that make SUVs and big pickups. GM stock took a trouncing yesterday and some analysts are using the “B” word (as in B stands for Bankruptcy, and that rhymes with … well, idiocy for one.) As the trouble deepens I suspect even more bad news will be coming in the months ahead.

Ford has similarly announced that sales have plummeted, especially for its F-150 pickup, long the best-selling vehicle in America. Now they can’t give them away. (You can sense desperation in the radio commercials from the major Ford dealer here in New Mexico, offering over $10,000 in discounts on big new pickups.) And why is it that this company is headed up by someone named Ford? Was that the best they could do, put the great grandson of the founder in charge? Surely someone else might have been able to do better? Well, perhaps not…

And now Chrysler has announced the imminent closing of the plant where it makes mini-vans, sales of which are also in the toilet, and is cutting back truck production. Their big, shiny Ram Tough trucks are a sight to behold as they cover acres and acres of car dealership lots from sea to shining sea, slowly deteriorating as they remain unsold despite big discounts plus six year interest free financing and a promise to help pay for the fuel.

What is going on at GM, Ford and Chrysler, not to mention other major corporations? How could they have let their companies get into the situations they are in today, when it was as plain as an illuminated billboard in Times Square that the predicted Peak Oil would soon be reached and there would be no more cheap gas to power those mechanical monsters? Did they actually believe the lies of Arab sheiks and oil company executives? Did they buy the drumbeat of hype and disinformation aimed at convincing the world that there would always be plenty of cheap oil? Apparently, and that makes them a gullible lot and fools at best.

During my lifetime I have observed a steady shift in the management of big companies. In my youth I worked for a while for a major corporation, International Harvester, which at that time was a Fortune 20 industrial company and one of the Dow 30 Industrials. Back in those days the top executive slots tended to be filled by men (always men) who had come up through the ranks from sales and engineering. They were the guys who knew what products to make, how to make them, and how to get them sold. Pretty basic stuff, and one would have to say important to the success of any manufacturing enterprise.

Then we started to hear about those wonderful “bean counters,” jumped-up accountants who knew how to squeeze a nickle until the buffalo, well, whatever buffalos do when being squeezed. More and more senior executive positions were taken over by those financial wizards, money managers who had little if any knowledge of how to conceive, manufacture or sell anything. But, man could they count those beans! Those often diminishing streams of beans resulting from the relegation of engineers and salesmen to the second string. They could money manage those corporations like nobody’s business as they slid into oblivion! Not to mention figuring out how to be rewarded like Emperors for their efforts.

And then there were the lawyers, once relegated to a position as advisors and watchdogs for the real leaders but who now began to move into top spots alongside the bean counters. Lawyers and bean counters make a potent combination. Yes, strangle the corporation in financial shenanigans and legalese … that’s a surefire formula for … well, what’s the opposite of “success”? Oh, yes, failure, that’s it. But entirely legal, sort of, if being just barely within the bounds of the law qualifies. It was management like that that took Enron to where it is today.

And then, yes, the Age of the MBA came swooping down upon American business. MBAs are the new gold standard of management. They are highly trained in theoretical things such as economics (a shamanistic hodge podge of bull muffins), market research, statistics (the art of making figures lie) and other such folderol, not to mention accounting and business law. They are the Swiss Army Knives of management, the anointed Businessmen for All Seasons. Like Samauri in feudal Japan, they became the cream of business society, the immediate and powerful heirs to the reins of power.

Do MBAs have actual experience in engineering, manufacturing, or frontline sales? Certainly not for that would be demeaning for such exhaulted individuals, but they do learn all the theory from real professors who never did any of those things either but who might have written theses and important journal papers about them, and what more could you want?

I am reminded of an allegory I heard some time ago, and while I will not repeat it in all its details the short version was as follows: The hard-working owner of a little hot dog stand has a modest success, enough that he can afford to send his son to Harvard to get an MBA degree. When the son returns, he tells his father that he is doing everything wrong and before long the hot dog stand goes out of business as the father tries to follow his son’s advice. To see the picture, simply substitute for “hot dog stand” the name of your favorite major corporation.

So, perhaps I should not be surprised that the leaders of GM, Ford and Chrysler are stuck on stupid. It’s too bad that their failures will affect the future for all of us. Could failure to foresee events clearly and prepare for them be construed as actionable acts of error and omission? If so, then those leaders should be facing charges for high crimes and misdemeanors and pay the price for the damage they have done, and continue to do, to our nation’s economy.

But don’t hold your breath for that to happen, and just keep on gritting your teeth when you hear the latest outrage about executives that bail out of corporations they have destroyed while clutching golden parachutes worth tens or even hundreds of millions of dollars. It is an outrage, and it is one of the many things that is going to be changing as the very different future that awaits us unfolds.

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