Friday, May 06, 2005

This is why I don't take business advice from the New York Times

From Taranto

Business Advice From the New York Times

"Wal-Mart critics often note that corporations like Ford and G.M. led a race to the top, providing high wages and generous benefits that other companies emulated. They ask why Wal-Mart, with some $10 billion in profit on about $288 billion in revenue last year, cannot act similarly."--New York Times, May 4

"Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. (GM) and Ford Motor Co. (F). . . . The decision by one of the nation's most respected ratings agencies comes as the two iconic American automakers are losing market share at home to Asian automakers, seeing sales soften for their most profitable models and are facing enormous health care and post-retirement liabilities."--Associated Press, May 5


DaveB said...

Hmmmm... Weren't there a few other major factors in GM's and Ford's fall from market grace? Like maybe competition from Japanese automakers begiining in the early 70s, along with the energy crisis and the corresponding need to develop fuel-efficient automobiles, to which the US automakers' managers were too slow to respond? Even now, they have only partially recovered.

Granted, they still make crappy cars (especially GM), and that probably has as much to do with the fact that labor got every bit as fat and lazy as management did, as it does with the aforementioned external factors. But asserting (or strongly implying?) that treating one's employees like human beings rather than pack animals is the road to corporate ruin, sounds a little bit like post hoc reasoning to me.

James B. said...

Well the point of the post wasn't so much as to argue a direct relationship, as to point out the irony of the timing of the articles. Yes, much of their problems have to do with producing crappy cars (Ford Mustangs aside of course), but especially in GM's case they also have serious financial problems with employee compensation. GM, for example, spends more on healthcare for retired workers, than it does on steel for its cars. While I am all for generous employee compensation (Walmart is cheap in that respect) I am also a realist. Companies have to be in business to pay employees. Bankrupt companies pay no benefits to anyone, executives, workers or shareholders. Whether this was caused through the greed of executives (see Enron) or employees (several major airlines come to mind) doesn't change the end result.

George Will addressed GM in an editorial a couple of weeks ago. Also had a series on it, if you can find it.