Sara Horowitz on the demise of GM and the future of unions.
Question: How will auto workers fare after the bailout?
Sara Horowitz: What I find particularly upsetting is not just what’s happening to people who have been working their whole lives in the auto industry, but also that the United Auto Workers, founded by the Reuther brothers, to me, were kind of like the Harvard and Yale of the labor union movement. And it’s really a testament to them that auto workers were able to work and have careers and really be middle class and really do well.
In the middle of all of these situations, and our whole economy is essentially this view that there’s something in that that’s not workable. And, I think, some pieces of that may very well not be workable and some pieces of that are showing what the next phase of our economy is going to look like. And by that, I mean, if you look at Detroit as one of our large economic centers in this country, you had a whole group of people who could afford a lot of things, and pay a lot of taxes, and supported a whole lot of other industries, all brought to you in large part by the United Auto Workers.
We have to be careful that we don’t kill the patient by curing one piece of this problem. I think it is a good thing that the Obama administration is recognizing that this is really new ones, this isn’t just about fixing the auto industry, per se, but that it’s a whole ecosystem together.
Question: What’s the best solution to the crisis in American manufacturing?
Sara Horowitz: I wish I had a very short and pithy answer to that. But because this is called Big Think, big ideas, that we’re realizing that you can’t expect a certain rate of return on manufacturing in the auto industry and expect to have one in America. That is, that we can’t have private equity rates of return of 18% to 35%; and that we’re going to have to be thinking that there’s something important about having certain industries; and there’s going to be a governmental role in keeping this alive; that it’s crucial that we make things in America. And, I think, this is the beginning of that realization.
I think that people are starting to see there’s something important here. I think, sometimes, people think, this is just about bailing out the auto industry; beginning, middle, and end, then done.
I think, hopefully, there are people who are saying, wow, there is something deeper here that we need to understand, that government can be a source of capital, or can subsidize some parts of capital, or can bear some bits of the risk--because we recognize that it’s really important to have a middle class in America. And I think that’s really what’s at stake.
We may very well come out of this; but the question is, are we going to come out of it looking like Argentina; with a very small group of rich people and a very large group of everybody else.
And I don’t think that’s what America is about.
Question: Did labor kill the auto industry?
Sara Horowitz: I just think that it’s just factually wrong. If you say that there are elements, in terms of the costs of health and pensions, which, I think, is true, then that’s a piece of it. It’s also a piece of not having a government strategy that says, we don’t care that Americans may very well, when asked, say they want the biggest Bahamut cars that they can get their hands on. But that’s not why we have government leaders.
One of the reasons why people want bigger cars is because other people have big cars and it’s not just because they’re pigs.
I have a child and I know that when I go out and I want to make sure she’s okay; and when kids are very young, you have to make sure that the airbags are one thing and another thing.
And having everybody having SUVs is just like a big arms raise. And government has to start saying that that’s not acceptable.
And those are the kinds of things that we need to do; is to start to having some public policy about what’s acceptable, what isn’t acceptable. If you’re still need to have a big hulking automobile, you should be paying a lot of extra fees associated with that. I think we need to be looking at the incentives and the disincentives.
Question: Is there any defense for massive bonuses?
Sara Horowitz: No, I really feel bad because 20 million just doesn’t buy what it use to.
What I think is more profound, I think it’s really easy to just be angry at all these CEOs. We’re so angry at them and they live in Greenwich, Connecticut and blah, blah, blah. But we set up the rules of the game. And when I say we, I mean, the citizens allowed this to happen over the last 25 years.
That we said, the job of any good CEO is to get maximum return on investment, period. It doesn’t matter sort of how they do it. And if any of them show restraint, then we’re going to punish them.
And you saw that that happen with the CEO of Home Depot, who now looks like a genius but in the last five or seven years, he said, I think it’s important to pay people good solid wages with benefits. And there has been a whole debate about, was that okay? Because was he maximizing shareholder returns?
I think that we really have to stop and say, did we set up the rules of the game so that these people just play it that way?
And I think that really is the bulk of it.
I think that we, as a society, have to hold ourselves responsible for certain things. And part of that is that we really believe that within our right, to really use up the earth’s resources in a way and be very wealthy and have state of the art kitchens and fancy things and these corporate CEOs were just the worst of it.
But it’s something that we see all over the place. And I think it’s a culture of greed that, I think, is bad.
Recorded March 31, 2009.