UAW's Contribution to Detroit's Demise

If you have a few years to waste, here's some reading I would not recommend - hat tip to J. Justin Wilson. There is only one organizational form in which any organization can manage this ludicrous level or regulation - and let's not forget that Detroit's Not-So-Big-Anymore Three do take a lot of cues from Congress, EPA, and various other regulators. It turns into a bureaucracy - an encompassing, burdensome, cumbersome, stifling bureaucracy. This organizational form can work very well in times of stability; it does, however, have one remarkable characteristic - of all organizational forms, it's the one most remarkably resistant and hostile to change. It reacts to a dynamic environment by ossifying, and to a stable environment by growing.

Modern economy, however, is anything but stable. If one looks for a predictable, linear career path, the place to look is not in business, but in academia or in government. Globalization has hit automakers with unique opportunities (a global market - and they seem to make great (profitable) use of it outside the US), but also unique challenges - competition by nimble, flexible, smart competitors. As has been noted by wise people, in globalization, it's not the big that eat the small, it's the fast that eat the slow. And why are the Detroit Three slow? Why, that pile of 2200+ pages might give some clue. We know from basic economics that any firm must combine labor, capital, and innovation in some production function in order to operate. Innovation in Detroit is too big of a subject to even begin to tackle, but it also happens to be predicated (in this case) on labor, so let's try to use the magic of Google to see what the UAW - Detroit's legally protected labor partner - actually does:

"UAW apologizes" - 1 hit
"UAW cooperates" - 72 hits
"UAW admits" - 87 hits
"UAW works with" - 131 hits
"UAW proposes" - 305 hits
Last but not least: "UAW takes the blame" - 1 hit (and it's from a blog, in the context of "UAW gets blamed", not "UAW accepts blame")

Let's compare with these:

"UAW sues" - 336 hits
"UAW blames" - 578 hits
"UAW cries foul" - 985 hits
"UAW threatens" - 1440 hits
"UAW lashes out" - 1470 hits
"UAW demands" - 2470 hits
"UAW rejects" - 2540 hits
"UAW warns" - 3160 hits
"UAW strikes" - 9100 hits

With a partner like this, who needs competitors?

I called a "sell" on GM back when it was trading at about $19/share (before Carpe Noctem was started - so only a few colleagues can testify to this), and held that call steadfastly when the stock rose well over $30/share. I am tempted to close this trade now, for a handsome profit, and not because I do not see GM's remaining equity wiped out in the near future, but because there seem to be better uses for this capital at this point. If you want any exposure to automanufacturers at this point, a value volatility play should be "long Ford - short GM".