Big Three: Leadership Failed

By now most of us are tired of the Big 3 Automakers. If it weren’t for the fact that no one wants to put people on the unemployment line, most of us, I suspect, would actually relish seeing them fail, just because we are tired of the shenanigans.

But, we’ve been down this road before, with the government bailing out at various times the railroads, the airlines, even Chrysler less than 30 years ago. What have we learned in all this?

First, bailouts have rarely been unmitigated successes. While the government intention – that the corporation not collapse and put tens of thousands out of work and cause huge ripples through the rest of the economy – have more or less come to pass, it has rarely been without some pain. And eventually all these companies have been restructured or broken up or merged or whatever.

Second, bailouts almost always delay inevitable – and often beneficial – actions. The fact is that the majority of these firms have such extensive problems that only through drastic measures can anything be saved for the long term.

Third, bailouts protect the incompetent. Lee Iacocca is an exception. More often, the heads of corporations that lead a company through a bailout are both to blame for it and incapable of exploiting the opportunity presented by the government. And this is the key point: these corporations aren’t suffering from ‘bad luck,’ as if, somehow everything was proceeding smoothly, with a productive, efficient work force working on modern production lines with a product line in high demand when en evil genie showed up and wrecked everything.

It has been a fact of every day life for forty years that US automakers needed to pursue some dramatic change. Every day. That mean the chairman and president of each Chrysler and GM could have woken up more than 14,000 times each and said ‘Today, we start to change things.’

They didn’t. They didn’t narrow their product lines, shedding redundant or unprofitable models. They didn’t shed brands that didn’t fit in. They didn’t place enough emphasis on quality so that US cars were competing across the boards with imports on reliability and performance. Nor did they shed the perception of relatively poor performance even when some began to make cars better than their competitors. They didn’t address a long-term solution to pay, health care and retirement for their workers, a problem that was identified what seems like a generation ago, and has now turned into a monster.

So, what are we in for? And it is ‘we’ as we all now ‘own’ those companies, with $25 billion already headed their way, and more possibly en route over the next months, the US taxpayer is well invested in the auto industry.

Answer: Probably more of the same. They will receive our billions, they will avoid the opportunity to act, the economy will begin its recovery some time in the next 12 months (there are already signs it has started – suggesting that the recession wasn’t as bad as we thought – thankfully – and that the credit bailout begun in November has had the desired effect), and they may well stumble through it, only to face this same problem again within a few years.

What should happen?

We should insist that GM and Chrysler file for bankruptcy, allowing each company to renegotiate pay, health care and retirement benefits; renegotiate contracts with auto dealers around the country that keep certain product lines open; terminate non-profitable product lines and allowing GM in particular to simply end production of certain brands whose major competition is other GM models. Certain brands might best be sold off to operate as smaller, independent companies (one can easily imagine Cadillac surviving on it’s own, for example).

Finally, and perhaps most importantly, let the market clean out the front offices. The board members need to go and the executive suites need to go. Despite the fact that you own large amounts of stock, your decisions have been awful. You failed. Go home and clip what few dividends you are getting. The Presidents and Vice Presidents, the CEOs, CFOs, CIOs, etc., you all need to go. For those who say this is too radical, some are doing a great job and some are needed for continuity, my answer is BUNK. None have shown the vision or leadership to move these companies in the right direction. Continuity with a failed past isn’t a benefit. It’s too late to play nice guy. (And don’t show up on a morning financial news channel in a year as ‘an industry expert’ or a ‘management consultant;’ if you had anything worthwhile to say you wouldn’t have let this happen. Go away and stay away. Take up fishing.)

And finally, to the UAW, you leadership is part of the problem. It needs to go, too. Insisting on pay and benefits packages that help to push your companies over the edge isn’t a good idea, it’s a bad idea. You need to go as well – all of your leadership.

The companies (and the union) need to dramatically streamline their upper management while they streamline their production, develop a new vision of where there respective companies are going and begin the rebuilding. That vision is essential, and will not come from anyone already found within your organizations. Your current leadership is incapable of creating or even recognizing any new vision. You need a new vision that will only come from the outside. You will only get there through the ‘rebirth’ that a bankruptcy and new leadership would provide.

Aircraft Carriers: Boondoggle or Bulwark

Recently the Secretary of Defense made the decision to reduce the number of aircraft carriers in the US Navy from 11 to 10. This transition will take place in 2012/2013 with the retirement of the USS Enterprise. While the Secretary’s statement goes on to say that the US will return to a force of 11 carriers later in the next decade, anyone who believes that is being naïve; the possibility that having reduced our force structure and reallocated that percentage of the Defense budget that a future administration, short of massive effort, will find a way to again realign the budget is hard to believe. Further underlining this point is that the Secretary stated that the US will move to a five year build program. Simple math thus yields a force structure of 10 ships, in as much as these ships will last at most 50 years, and even then only at very high and accelerating maintenance costs beyond 35 years of age. (USS Enterprise was commissioned in 1961 and will be 51 or 52 years old if retired in the 2012-2013 time frame.)

Nevertheless, the option has been presented that this, or any other future administration and the nation can save money in the coming decades by no longer building aircraft carriers. One point that is often raised is that it has been decades since carriers have been used in the role for which they were designed – that is, fighting other fleets and establishing sea and air control, they have seen the end of their useful life, and are now are nothing more than fantastically expensive targets for sophisticated Chinese weapons.

The problem is that these arguments don’t quite hold water. Working in reverse order, the issue of ships as targets is, in a sense, undeniable. If the US were to go to war with the Chinese (or any other maritime power), every ship put into the Western Pacific would be a target. The distinction is that an Aegis cruiser or destroyer (like the ships that shot down the satellite early in the year) would have difficulty surviving any hit from such weapons; carriers, while being damaged, have much greater survivability then do smaller ships. Eliminating ‘capital ships’ from the fleet simply and substantially reduces overall survivability. Nor does not begin to address the difference in offensive firepower that an aircraft carrier has over a cruiser. To put it simply, it’s substantial.

As to the issue that carriers are easily targeted, this is less true than it looks. Certainly, they can be found by a dedicated adversary who is willing to commit the assets to find them. Is it easy? That depends on a long list of items. At the same time, they are more difficult to target then the fixed air bases that the US would fly out of in any and every theater in the world. All of them are on Google Earth, where you can easily get fairly precise latitudes and longitudes. How moving aircraft from a mobile field that at least has to be ‘re-found’ every day, to a fixed airfield where not only the aircraft, but the machine shops, the weapons storage areas, the fuel pumping facilities, etc, are not only known, but are subject to both attack and sabotage – how this makes for an increase in security and survivability is not intuitively obvious to this author.

Another argument is that carriers are extremely expensive. Again, yes and no. As percentages of national wealth (GDP) they are roughly the same cost as battleships were 75 years ago. More importantly, the real cost of the Navy (and the Air Force, for that matter) is not in the ships (or aircraft), but in the personnel. Over the course of the lifetime of any large warship, the crew is more than 50% of the cost. When we consider that less than one-third of the US Navy is on ‘sea duty’ (that is, those forces that actually deploy overseas, even when not attached to a ship), and that the rest is what might be called the shore establishment, the real way ahead for the Navy to save money is to alter that ratio, something the Obama administration should absolutely do. As an historical note: in 1941 the Navy had a similar number of ships, but 75% of the Navy was on sea duty, resulting in a Navy that was considerably less then 1/3 the size of today’s Navy in personnel and less than ½ the cost. Certainly, by eliminating the carriers the Navy could reduce manning by 5,000 sailors per carrier, but rarely do any of these discussions say anything about reducing the manpower of the Navy (or any of the other services).

Another issue is left unasked and unanswered: should the Navy continue to build cruisers and destroyers, the ‘protective ring’ that surrounds the carrier? Or should these also be terminated? If there are to be fewer carriers, would we reduce the number of other ships? Is there any other platform, present or postulated, which can take the place of a carrier in all its many roles? What ships would take the role of USS Abraham Lincoln following the tsunami in 2006? And if the replacement solution requires more than one platform, what is the total cost of the replacement?

There also seems to be some confusion as to the real combat role of the Navy. The Navy’s role in combat is to establish control of an ‘undeveloped’ theater. Simply put, the Navy is responsible for entering an area, eliminating key elements of the threat, establishing sea and air control over that area, and thereby providing an entrée into the area so that the Army and Air Force can move in large, sustained forces. Following that, the Navy then acts in support of the ground forces, as it has, for the most part, done in Iraq for the last 17 years and Afghanistan for the last 7 years. In doing so, the Navy provides the policy maker a wider range of options than do the fixed air bases (air bases which are – again - much more easily targeted by sophisticated weapons (or terrorists) then are ships). President Elect Obama need only engage in a brief review of history to see when his predecessors have relied on carriers – which can operate without anyone’s approval – to conduct certain operations, rather than be hamstrung by trying to act from an air base in someone else’s country.

Which leads the key issue: what do these people think a Navy is for? There are those who suppose that Navies are simply for fighting wars at sea. History doesn’t really support that. In the 232 year history of this nation we have had real war at sea, that is, an adversary who could engage US ships with their own ships, in only seven wars: the Revolutionary War, the confrontation with the Barbary Pirates, the War of 1812, the Civil War, the Spanish American War, World War I and World War II – a grand total of 22 years of naval combat.

In fact, the history of the Royal Navy and the US Navy over the last 300 years suggests that the role of these two navies at least is something else again. Navies provide strategic presence, they make the maritime ‘by-ways’ secure; they make the global market place possible. They do this my assuring friends and allies, dissuading those who are thinking other thoughts, and deterring those who already have ulterior motives. The anti-carrier crowd denies or ignores this.

A further argument is that while the Navy claims carriers provide deterrence, in fact they have failed to do so in any number of circumstances, such as Korea in 1950, etc. Such arguments really underlie ignorance about deterrence, not the weakness of aircraft carriers. Deterrence is not a product of a weapon system; deterrence is a product of the words and deeds of a nation. Weapon systems are tools of deterrence. Deterrence failed in Korea for a host of reasons, not the least of which was a serious error on the part of the Truman administration in clarifying what it would and would not do to prevent the spread of Communism in Asia. The presence or absence of carriers had little if anything to do with the failure. In the case of North Vietnam (and presumably the case with Iran right now) it was a case of a perception by one side of lack of will in the other (the US) that marked the failure of deterrence.

US law says that the Navy must be prepared to conduct sustained combat operations at sea in support of US interests. But, what happens between the wars is an equal, and perhaps greater, justification of a Navy. The ‘globalized’ world we live in today is the product of two great forces: the Royal Navy and the US Navy. The role of the capital ship, whether a line of battle ship like HMS Victory, or a 20th century dreadnought or an aircraft carrier is first and foremost to present such a calming influence on the international maritime environment that there is no war. For more than three centuries the two great navies of the world – the US Navy and the Royal Navy - have been largely successful in doing that. The capital ships – yesterday’s battleships and today’s carriers - have been, and continue to be, the cornerstone of that success.

The Importance of Ideology

It has become common-place to hear various political commentators use the words ideology or ideologue as part of a negative label for anyone or any decision they don’t like. In fact, just recently, a very prominent politician remarked that:

“It is important that we make decisions based on facts and evidence as opposed to ideology.”

A further statement was that we needed to

“embrace pragmatism, not just as a governing strategy but also as a basic value.”

Certainly, no one argues with facts. As Melvin Laird, and later Daniel Moynihan, was fond of saying, “we are all entitled to our own opinion, but we are not entitled to our own facts.” But, both Laird and Moynihan understood the difference between opinion and ideology, the first simply a view on a given situation that is not necessarily based on fact or knowledge, the second, an organized set of beliefs that form a social or political philosophy.

Facts alone cannot provide answers, because facts alone can be assembled in any number of ways to reach different conclusions. How they are assembled into an ‘argument’ is dependent at least in part by what you believe. In the United States we all, or most of us, certainly, share an ideology that is Judeo-Christian in origin, and we also share a political philosophy based on the Declaration of Independence and the Constitution. Is it wrong to consider these roots as we assemble facts and try to determine the correct course? Or should we make our decisions simply based on ’facts and evidence’ and try to ignore our beliefs?

Pragmatism has been hailed as a new approach. One writer recently remarked that it is time to ‘embrace pragmatism, not just as a governing strategy but also as a basic value.” But, what is pragmatism? Pragmatism is simply a philosophy, a belief (an ideology) that holds that the truth or worth of any idea is measured by its practical consequences. In other words, the value of any idea is in the outcome, which can also be summed up with: the end justifies the means. This is a basic ‘value proposition.’

Is this something we should strive for?

There is an old saying: “Fiat Iustitia, ruat caelum” – “Let Justice be done though the heavens may fall.” It is the opposite of pragmatism. It suggests that you do the right thing, regardless of the outcome.

But to do ‘the right thing,’ to ‘do Justice’ is to say that you have a standard of right, of justice against which behavior will be weighed. That is to say, you must have a set of beliefs, an ideology. To reject ideology and claim to act based on facts alone is to, in fact, reject any true sense of justice or right.

An excellent example of how facts can be assembled to reach the wrong, and in this case outlandish, conclusion is Jonathan Swift’s masterful piece of satire: “A Modest Proposal: For Preventing the Children of Poor People in Ireland from Being a Burden to their Parents or Country and for Making Them Beneficial to the Public.” As everyone knows, Swift recommended that the Irish children be eaten. It is so well crafted and so outlandish (and immoral) it served the purpose of resetting the entire discussion and pointing out the obvious: these were real people, husbands, wives and children and that real, moral solutions needed to be found.

In a similar manner, discussions about such issues as health care, when conducted from a position of ‘pragmatism,’ can lead to equally immoral proposals. How soon will it be that health care is denied someone because the central management office has decided that the cost is too high given the actuarial tables forecast of expected remaining lifespan, but there is enough money for assisted suicide so that the individual won’t be a burden to the state or the family? In fact, this type of ‘pragmatic’ decision-making has already taken place. (Look up Barbara Wagner of Oregon). It will only be a matter of time – perhaps a few years, certainly within a decade or two, when analysis of your DNA will allow fairly accurate assessments of the likelihood of someone contracting various diseases and other maladies, allowing your doctor to identify you as someone who will cost the health care system a great deal of money. Pragmatic decisions would drive a government health care plan to save money by eliminating you early, before you cost too much.

There are many issues beyond health care that are being addressed to day in which politicians are calling for ‘pragmatism over ideology,’ for working above party and beyond partisanship. Winston Churchill once observed that:

I have noticed that whenever a distinguished politician declares that a particular question is above Party, what he really means is that everybody, without distinction of Party, shall vote for him.

We should all work together to solve the problems of the day. But calls to ‘be pragmatic,’ to ‘abandon ideology,’ and the like are often at best disingenuous and more likely dangerous. Ideology is what makes us Americans and what makes us (hopefully) just. We abandon ideology at our peril.