Thursday, June 28, 2012

On corporate economics and comment moderation


A poster named Lenard Neal wrote in a comment today taking me to task for my commentary regarding the Ford plant in my previous post.

Lenard is apparently upset because I said that the unions killed off the massive Ford Motor Co. Rouge plant after Ford weakened it by failing to reinvest in it when they had the money.

Lenard replies that Henry Ford made the plant work by paying his employees a living wage that allowed them to buy his cars. Well Lenard is right on that, and I've never argued otherwise. Lenard also claims that Henry Ford was not a Democrat. Again...Duh. No issue here. Henry Ford did a lot of things back when he built and ran his empire. Some were good, and some were not. All in all though, I personally admire the man despite his flaws. He exemplified "capitalism" and showed what a man could do if the government would just stay out of the way.

But Henry Ford ran the company from 1906 until 1945, when he was replaced as President by his grandson, Henry Ford II. He was and is ancient history as far as Ford Motor Company is concerned. My claim stems from some of Ford Motor Company's decisions in the 1960's and 1970's, long after Henry Ford was away from the helm. In the days following World War Two, American industry was on top of the world. As about the only country with an intact industrial infrastructure left, we were making everything for everybody and life was good. However, many of our heavy industries, to include the steel and automotive industries, took the record profits that they made in the post-war decades and reinvested them in other areas, all too often failing to upgrade aging plants and machinery. As a result, a day came when new European and Asian steel mills and auto plants came on line, able to make better products more efficiently because they were using state-of-the-art technology while our firms were still using the same old stuff from decades past.

You see these furnaces at Rouge, Lenard?

Let me date those for you. Furnace A came on line in 1920, and Furnace B in 1922. Furnace C, the most modern blast furnace there today, came on in 1948. And Rouge Steel still uses those antiques today (except for the one that finally blew up in 2001, nearly killing two workers), supplemented by two electric furnaces that they added in 1976--furnaces that were fine for the 1970's but which are unable to produce steel as good or as cheap as newer plants do overseas today. Add to this Ford's decision in the 70's to stay away from production of small, fuel-efficient cars that cost them a lot of their market share, and suddenly it's obvious why this plant and Ford Motor Company in general went into the red, big time. Ford's steel demand actually dropped off so much due to declining car sales that they told the Rouge plant to start selling excess production on the world market, a market in which the inefficient plant could not compete, especially when handcuffed by the unionized workforce that demanded higher pay than any other auto workers or steel workers anywhere in the world. So yes, Lenard, Ford Motor Company was crippled and nearly killed off by bad business decisions in the 1960's through the 1980's, and the unions made it nearly impossible for them to compete with European and Asian companies that were using newer technology and processes and a trim, non-union workforce to made better cars cheaper. That's why Ford Motor Co. finally sold the Rouge Steel plant off in 1990, retaining a mere equity interest and buying roughly 30-40 percent of the mill's output these days. A Russian company, Severstal, owns those blast furnaces today and the big Dearborn Assembly Plant where so many of the cars were once made is gone now, replaced like many other auto plants by a vacant lot. How many union workers get a paycheck from those vacant lots, Lenard? The unions could have been content with a living wage, but they demanded buckets of cash for the most menial worker, topped off with lavish benefits and pension plans that no company today can afford to pay out. In many instances, labor unions have priced themselves right out of work by placing too high a value on the labor while refusing to let plants modernize with new technology because it might replace a few workers who pay union dues. And if the workers are total boat anchors who suck at what they do because they drink or use drugs or have bad attitudes? Too bad, because unions exist to keep just such people employed no matter how big a drain that they are on the company.

Now we could have discussed this like grown-ups for a while and maybe even had some fun doing it, but Lenard had to go and get personal and launch off into a screed about what he thinks my life and background are. Aside from the fact that he totally missed the mark, why do so many people do that when there's no need for it? A little civility and who knows, but we could have had quite the debate. But as it is, Lenard proved the need for comment moderation when he went to the personal and began hurling obscenity in lieu of trying to convince me with facts or sound theory.

Ah well...


  1. Some losers just cannot 'stand' the truth... Invective is their ONLY defense...

  2. I'm much more inclined to side with documented history than blather. Right on, Murph.

    Sad documentary of the decline and fall of an industry.

    Think we can resurrect it?

  3. A very good friend of mine back when I lived in Joliet (yes, that Joliet) worked for U.S. Steel as a "10-point Clerk". His wife worked there, too, as a machinist. the steel industry died a slow, agonizing death in the 1970's, my buddy was laid off. And he was mad at the steel company for training him in a job "skill" that was of no use in any other industry, and paying him $15/hr in the middle 1970's. He was lucky to get a job paying $6/hr after his unemployment finally ran out.
    Those were MUCH bigger dollars back then, and he and his wife (who made something live $22/hr) lived frugally, saved their money, and paid off their house in something like 10 years. They weren't really hurting like a lot of other people back then, but he and his wife both blamed the unions for creating these jobs, and paying the employees WAY too much to do them.
    They both hated the union, but sure loved the pay.

  4. @Moogie: Yes, I think that our industry can come back. But they are going to have to get learn and shed the debt of hundreds of thousands of retirees who are still collecting full pensions decades after their last day of work. They can start by ending such programs for new hires and current employees. They also need to bring wages down to more reasonable levels for the work actually performed and replace a lot of expensive workers with modern robotic equipment capable of doing more precise repetitive work without errors, breaks or going sick. And bringing in contract workers for lots of the jobs and finding non-union vendors to supply sub-assemblies and components cheaper would help, too.

    There is lots that these companies could do, but the unions are going to have to get our of the way or be eliminated, first. They don't really serve a purpose these days other than to artificially inflate wages and drive up costs, costs which get passed on to the consumers until eventually that get to be too high and the business can't compete.

    When I get to be president, America will become a right-to-work nation and unions will be just a bad memory.

  5. Agree with you about the unions. Let's talk about management. After the Deuce checked out, Donald Peterson took over. Under him, Ford made more money in a quarter than the rest of the world wide industry combined. That money went to buy European brands (Volvo, Aston Martin, Rover, etc.) that were near world class golf. Add a few high end corporate jets, and it was all pissed away. Had they reinvested???

  6. @ WSF: Exactly. That money should have stayed in the plants, modernizing them and ensuring that they could produce tomorrow's cars cheaply and efficiently. More money spent on R&D would have helped them keep the consumer edge as well, but like many US industries, they decided to diversify their corporate portfolio and used the money to buy other businesses instead of improving the one that they already had.

  7. Now we see the ugly side of human nature that never changes. The greed of the owners and the greed of the union workers. Folks just never have enough.

    When's the last time you heard someone say, no thanks, I have enough? Never enough effects capitalists, socialists, and everyone else. Show me folks who are satisfied with what they have, and those are the ones I'll hang out with.

  8. Yes, the fool who drives a discussion with personal invective and punctuates his reasoning with middle school profanity eventually forces us to moderation of comments and in the long run debate is stifled and the good guys lose. I still get postings from the fool who bragged that he had "won" when he forced me to moderate. Then he whines that I "censor" him. A pox on all their houses.

  9. Anonymous2:38 PM

    Calling names is all the left has

  10. Ah, personal attacks and profanity directed at a perfect stranger - the sign of a small person who is angry because they can't actually support their position.

  11. @Murphy -- if I didn't see him sitting here beside me here in Louisiana, I'd swear it was my husband doing the typing there in West Virginia!

  12. Anonymous7:37 PM

    Yeah, I felt bad about that. A am sorry. I apologize.

    I do so enjoy your blog.

    As far as profanity... well, I just swear a lot. It's what I sound like in real life. Your background, and the comment about paper pushing? Yeah, that was irrational.

    Well... not everyone can do it, we can't all be middle managers, and in the remnants of the factory life that I work in, people now aspire to a 'sit-down' job as opposed to trying to cope with basically competing with 3rd world countries.
    The unions? Well, they got greedy and corrupt, like all human heirarchies in which a few people are put in charge.

    The globalization that occurred in the 1990s threw EVERYONE for a loop, and essentially destroyed the American way, which was based on extraction of environmental resources to win a World War.

    Now, there are very few people around me who can make a decent living, a 'Middle-Class' living, doing manufacturing, and they are all highly skilled, and equally demoralized and upset, if not outright angry. Most of them make military equipment.

    Thee are a lot of really, really angry people in the Rust Belt. A lot of that anger is, in my opinion, justified. We can't all go to college and toss papers around, someone has to MAKE SOMETHING! or we buy it from China.

    I apologize again for my outburst, and will try to ensure it doesn't happen again.

    Oh; Ford did try to control at least one coal mine in your part of the country, and the consortium of coal companies blocked him out. That's interesting too. Happy reading!

  13. @ Lenard: Apology accepted. We're good. And yes, I wrote a bit about Ford's mine in the New River area about three to four weeks ago when I visited that mine. It was really the railroads that blocked him by refusing to deliver coal gondolas when he needed them.