Needless to say, the red-hearted Grand Rapids folks were polite about yet another Lansing money sucking idea, but let’s get serious here.  Regional collaboration isn’t going to happen in this state until our communities start going bankrupt and we force the administrators and unions to figure out how to work together.

An office filled with consultants and studies and of course, a few ex-state legislators who just happened to be term limited out of their jobs isn’t going to make any one in government to agree to give up their job or their city council seats or their budgets.  In fact, the real impact of Donigan’s  Intergovernmental Advisory Office (embodied in House Bill 5930) will be to delay regional collaboration by encouraging meaningless studies, community dialogues, conferences, etc.

As most people in the business know, there are many laws on the books in Lansing that actually make it more difficult for communities to cooperate, including Public Act 116 of 1954, which permits intergovernmental collaboration agreements to be used as a cause for recall efforts against elected officials. Check the Citizens Research Council report which describes the many legal obstacles.

If Donigan wants to serious about regional collaboration, she’ll quit the kissing and hugging and square off the real roadblocks to regional collaboration—her fellow legislators in Lansing.

Memo to our economics professors: these riders don’t stand for pestilence, war, famine, and death – we already have a surplus of these biblical ills.  No, the horsemen of tomorrow’s apocalypse stand for delusion (as in the leaders of the West), bankruptcy (as in global), depletion (as in oil) and terrorism (as in Times Square).

For months, the Obama mouthpieces have been telling us that the worst is over; then the stock market falls a thousand points in one day and wipes out the market’s ill gotten 2010 gains.  Greece is functionally bankrupt and will topple many of the banks that have collectively loaned 11 million Greeks over  $300 billion dollars.  The demographic math on Greece’s debt proves that we made a profound mistake by placing our nation in the hands of the Federal Reserve.  After the ancient pillar of democracy falls,  Spain, Portugal, the UK and then finally us will soon follow.  BP’s petroleum engineers, the real gods of our civilization, can’t figure out how to stop the oil spill in the Gulf of Mexico, and oil prices which have mysteriously crashed in the last week will begin to climb and kill off any green shoots that survive the next down leg. And then there is Terrorism, which has been circling the globe alone since 9/11.

If you could hear the horses, they would certainly say: “The blood- dimmed tide is loosed.”  This line is from the “The Second Coming,”  a poem written by William Butler Yeats almost a century ago, after World War One consumed the flower of a European generation.  As for what comes after these horsemen flying this way, who knows?  Unfortunately, Jesus has been showing up only at Christmas, usually in the malls.

THE SECOND COMING

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: a waste of desert sand;
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Wind shadows of the indignant desert birds.
The darkness drops again but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

In 1978, GM employed more than 482,000 Michigan residents. Today, it’s less than 50,000. Yes, in the good old days, GM stood atop the Fortune 500. Today, the US and Canadian governments own 70% of its stock, and American taxpayers will invest almost $50 billion in its rescue plan. President Obama has declared, “I am absolutely confident, if well managed, the new GM will emerge. However, nothing wounded goes uphill and neither will GM, even though it has purportedly “freed” itself by declaring bankruptcy. Unfortunately, the company can’t free itself from its history or the oncoming tragedy of its future.

The key to understanding GM’s fate rests in the notion of psychological resistance. The term first arose in Sigmund Freud’s work in the 19th century. He saw resistance as the process that his patients used to defend themselves from remembering unpleasant memories or recognizing uncomfortable truths about themselves or their world. GM has been a serial resister for the past fifty years.

In the 60′s, GM resisted Ralph Nader’s accusation that its rear engine Corvair was unsafe. In Nader’s book, Unsafe at Any Speed, he asserted that the Corvair was prone to “tuck under” in certain circumstances. GM not only refused to acknowledge the veracity of Nader’s claim but also conducted a harassment campaign against him. It hired private detectives to shadow him, tapped his phone, and conducted a long investigation into his personal life (including his sexual habits). Nader eventually won an invasion of privacy suit against GM and used the money to launch his lobbying work.

GM has resisted several oil crises, refusing to dedicate itself to building a small fuel efficient car that could compete with Japanese automakers. When the first oil crunch came in the 1970′s, it responded by fielding a fleet of ugly front-wheel-drive shoeboxes. Who can forget the Oldsmobile Omega and the Pontiac Phoenix or that brand destroyer, the Cadillac Cimarron, a clone of the far less expensive Chevy Cavalier? In 1999 GM bought the Hummer line from AM General, while Toyota prepared for a 2000 launch of the Prius. Even in 2006, after Hurricane Katrina had turned Peak Oil into a household term, GM re-launched gas guzzling SUVs like the Chevy Suburban and the Cadillac Escalade. Decisions like this make one wonder if they had economists who could understand an oil price trend line.

In the 80′s, GM launched its Saturn line (a recent bankruptcy victim) and a joint venture with Toyota in California. Unfortunately, its corporate culture resisted the very expensive and hard earned knowledge gained from these bold innovations: female friendly dealers build brand loyalty (Saturn) and lean manufacturing reduces cost and improves quality (Toyota). Also in the 80′s, GM Chairman Roger Smith acquired EDS, and EDS founder Ross Perot joined the Board of Directors. Smith and Perot had a deep falling out about the company’s change-proof culture. Said Perot about GM, “When they’re in a crisis, the first thing they do is hire a consultant. Then, they have meetings to define the crisis. Afterward, they appoint a committee to talk about the crisis.”

One could go on and on about GM’s resistance, but no article about GM’s current and future demise is complete without a mention of its relationship with the United Auto Workers (UAW), the second biggest shareholder in the new GM. The UAW was born out of fire in 1937 when the UAW bested GM in a sit down strike in Flint. Over the decades the two organizations have danced together like in-laws at a shotgun wedding. The 1999 contract could have been called a mutual suicide pact. Despite warnings from analysts about escalating health care and retirement benefit costs, GM gave away the house with increased wages, health care benefits, and lush perks like tuition reimbursement for UAW dependents (up to $1500/year). But the corporation couldn’t escape the math of its largesse and the UAW’s greed. By 2005 GM had lost its investment grade credit rating and its ability to make a profit.

The fault for GM’s downfall lies within its leaders. A psychologist might look at GM’s post World War II history and wonder if its leaders were sabotaging themselves, driven by some insidious unconscious force. From Chairman James P. Roche’s 1966 apology to Nader in front of the Senate to Rick Waggoner’s woeful beggary in his appearance before Congress at the end of 2008, GM’s leaders have failed to solve problems. Sometimes they failed to anticipate problems before it arrived (Japanese competition). At other times they failed to solve problems that stared them in the face, like the 2001 decision to roll out the Pontiac Aztec, a vehicle which became a symbol of GM’s inept product development.

The big question is: will the past be prologue for GM’s future? A big clue has already surfaced. In June, shortly after declaring bankruptcy, its financial advisor (Evercore Partners) predicted a rosy future in court filings. According to Evercore, a lean, debt free GM will make a $3 billion profit before taxes in 2011. This figure will rise to $7.8 billion in 2014. These profit forecasts are based on U.S. total vehicle sales increasing from 10 million this year to 16 million by 2012. This rising tide will allow GM to expand its sales from 3.8 million to 6 million by 2014! One hates to keep returning to the psychology, but these forecasts seem delusional at best.

Over the long term, you can’t resist demographics. The US population is aging. The number of people over 65 will probably double in the next 30 years. It’s an industry maxim that older people buy fewer cars. The US economic collapse is also shifting the demographic math against GM. The destruction of $10 trillion in household wealth in the U.S. and the transformation of 401Ks into 201Ks will make it difficult to GM to retain its aging customer base – let alone increase it. In 2007 the average new vehicle purchaser was 43. In 2008, this figure rose to 48. Obviously, people are choosing a mortgage payment over a car payment. Worse yet, two of the GM’s four brands, Buick and Cadillac are locked into a dying generation. In 2008, the average Buick buyer was 68 years old, while the average Cadillac buyer was 56 years old.

Much has been written about how bankruptcy will damage GM’s brand image, not to mention the loss of GM customers through shedding the Pontiac and Saturn brands. But little has been written about the decline of one of GM’s most important customer cohorts: GM employees, families, retirees, and suppliers. In prior years, this “internal” customer base has provided nearly 50% of GM’s US sales. As GM slashes employees, suppliers, and retiree benefits, this cohort will be less and less able to purchase GM products. To date, despite billions spent on marketing and vehicle discounts, GM has not been successful in attracting enough foreign car buyers to replace its dying internal base. Again, there is the resistance problem. People don’t want to give up their Hondas and Toyotas for a GM product, and that won’t change soon.

Now that the US Treasury Department is calling the shots at GM, one wonders about the real game plan. Ostensibly, they plan to make GM profitable and make a return on their $50 billion investment. But, government officials can read the demographic charts, too. If the US auto industry continues to flounder, a likely outcome given the continuing decline in housing values and rising unemployment, Ford will go bankrupt too. Unless Ford can best the Toyota/Honda machine, Ford will be at a competitive disadvantage against a government owned, debt free GM. It’s likely that the government has already spoken to Ford about easing the company into bankruptcy. As the Obama regime has put its prestige on the line for a GM recovery, an uncontrolled Ford bankruptcy is a distraction it can’t afford.

There is a promising model for a long term recovery. In the 1960′s, the US railroad sector collapsed. Much like the US auto industry, the railroads were burdened with high labor costs, union conflicts, a declining customer base, deteriorating infrastructure, stifling regulations and excessive debt. In 1970 Penn Central Railroad went bankrupt, an event which threatened to destroy the entire railroad sector. It was the largest bankruptcy in US history, shocking the nation much as GM’s bankruptcy did.

In 1973, Congress created Conrail to save the railroads. Through the 70′s and 80′s, it poured billions of dollars into the company to keep it alive, while management right sized it. In 1983, Conrail turned a profit and in 1987, the government sold Conrail to the public in a stock offering. In 1997, the Northern Suffolk and CSX railroads agreed to purchase Conrail’s stock, and today the company lives on as switching and terminal railroad for its owners. Given the prospect of Peak Oil and escalating oil prices, Conrail might have been one of the best investments the US government made in the last thirty years. Hopefully, we will be able to say about General Motors someday.

Bankrupt ideas are harder to get rid of than sweaty armpits. Like stocks falling to zero, we don’t want to give up on them. I once sold a stock at seventeen cents. I don’t want to tell you what I lost, but that’s the point, isn’t it? A colossal failure to recognize reality.

And when it comes to deadbeat ideas that squat like flat tires on our culture, we have squadrons of leaders and their public relations shills driving us to pump up these lifeless ideas with our money.

Now you might think I’m going to complain about our taxes or about our ridiculous marijuana laws (is there any teenager left in Michigan who hasn’t been arrested for weed or tried it?) or the terrible conditions of our roads. No, I’m after bigger monsters, the ones we positively must kill if we want to rise again in Michigan.

1. Let’s stop thinking about expanding our vaunted health care system … it already consumes 17% of our gross national product and our leaders want us to pay more and more of our taxes to support it. Really? I and my insurance company have paid more than $80,000 in the last three years to treat my daughter’s psoriasis, and her condition has actually deteriorated since she got treatment (at my urging) from our health care system. You were right, Chelsea. You didn’t really need a doctor.
2. Let’s stop thinking about our project to grow our suburbs from lake to shining lake … our leaders tell us that we need more subdivisions, more convenient shopping, more Class A office space, more tax breaks for developers and more roads to make commuting faster. Really? If there is a commercial office building left in Farmington Hills that isn’t at least 20% empty, someone from the CIA, DIA, INS or IRS needs to investigate it for criminal activities. If there is a school district in Oakland County that isn’t laying off or thinking of laying off teachers, audit their financial statements quickly. And finally, if there is a union in Southeast Michigan that is willing to make the contract concessions necessary for its community to survive the oncoming budget bloodbath, please make your leadership known to this blogger for you are true American heroes.
3. Let’s stop thinking about our futile efforts to put back things the way they used to be … long ago our leaders and their non-profit networks turned this hopeless enterprise into a series of noble rescue operations that smack of emotional blackmail. There’s a radio commercial in which a Hollywood star pleads with his listeners to “save” the national parks. The last time I looked, the federal budget exceeded a trillion dollars. I already paid my taxes, Mr. Hollywood Star. If you want to save the National Parks, convince Obama and Congress to stop bailing out the banks. You party with them. I don’t.

I could go on with my list, but I think you get the point. Unfortunately, even if you do admit to carrying around a bankrupt idea or two, they are very difficult to discard. You sort of have to chop it out of your head. For example, in 2008 I believed that Peak Oil had doomed our civilization. The end of the world looked like a good bet when gas topped four dollars a gallon, but when gas plunged below two dollars at Christmas; I reran the spreadsheet in my head. Yet, falling gas prices didn’t blast out the idea entirely. Only when I read a blogger complaining of depression because he was sick of waiting for the final, bloody chapter of the Oil Age did I get rid of Peak Oil.

I’m sick of being checkmated by both kinds of bankrupt ideas: false hopes (the uptick is coming, it always does) and rosy tales of doom (Peak Oil will force us to trade in our nasty polluting cars for horses). Lately, I’ve found myself wanting the world to go on, wanting the economy to grow again, wanting to hear stories of start-ups and inventions, and wanting to see young people staying in Michigan because they believe in a profitable future. In my next post, I’ll offer a set of powerful ideas to put Michigan back in the black. Stay tuned.