I grew up in Michigan and my father and brother still live there, so the fate of the automobile companies is important to me. It’s hard to realize just how dependent the economy in Michigan is on the automobile companies. Even in the northern part of the state where I grew up, more than 250 miles from Detroit, our economy rose and fell with the car companies. When GM and Ford did well, then more people vacationed in the northern part of the state, the price of land for second homes went up and jobs building and developing land for cottages were available.
Of course when the automobile companies did poorly, so did everybody else. It may not be true that “What’s good for GM is good for the country”, but it has always been true in Michigan.
This preamble explains why I’ve been thinking a lot about why the automobile companies are in such difficulty, and why Ford is doing relatively well while GM is in miserable straights. Both companies have almost the same cost structure and the same opportunity to succeed or fail. I think I have a theory for Ford’s relative success and GM’s relative failure.
Ford is still, to s
ome extent, a family-run business. William Clay Ford, Jr. is Chairman of the Board and Edsel B. Ford II is also on the board of directors. William Clay Ford, Jr.’s great-grandfather was Henry Ford, the founder of the company. (I think Edsel is his cousin, but I’ve never been good at family trees. Check for yourself here: http://en.wikipedia.org/wiki/Ford_Family_Tree.) General Motors lacks any such family connections. I think this makes a difference in the way the companies think.
When your family name and most of your fortune are tied up in a business, then I think you look at its long-term viability, not just its short-term success. On the other hand, when you are in the end only an employee of the business (no matter how highly compensated), then you look at the shorter term.
A business owner whose life and fortune is inextricably connected with his company is a capitalist, putting his own fortune at risk with the success of the business. If the owner of the business isn’t at risk personally, then he really isn’t a capitalist—and I don’t think our market-based system works properly when the person running a business doesn’t have the extra edge that comes from having his own money at risk.
Of course when the automobile companies did poorly, so did everybody else. It may not be true that “What’s good for GM is good for the country”, but it has always been true in Michigan.
This preamble explains why I’ve been thinking a lot about why the automobile companies are in such difficulty, and why Ford is doing relatively well while GM is in miserable straights. Both companies have almost the same cost structure and the same opportunity to succeed or fail. I think I have a theory for Ford’s relative success and GM’s relative failure.
Ford is still, to s
ome extent, a family-run business. William Clay Ford, Jr. is Chairman of the Board and Edsel B. Ford II is also on the board of directors. William Clay Ford, Jr.’s great-grandfather was Henry Ford, the founder of the company. (I think Edsel is his cousin, but I’ve never been good at family trees. Check for yourself here: http://en.wikipedia.org/wiki/Ford_Family_Tree.) General Motors lacks any such family connections. I think this makes a difference in the way the companies think.When your family name and most of your fortune are tied up in a business, then I think you look at its long-term viability, not just its short-term success. On the other hand, when you are in the end only an employee of the business (no matter how highly compensated), then you look at the shorter term.
A business owner whose life and fortune is inextricably connected with his company is a capitalist, putting his own fortune at risk with the success of the business. If the owner of the business isn’t at risk personally, then he really isn’t a capitalist—and I don’t think our market-based system works properly when the person running a business doesn’t have the extra edge that comes from having his own money at risk.
