Tuesday, October 23, 2012

What's Good for General Motors ...

As President Obama and Mitt Romney jostled back and forth about the bailout of General Motors and Chrysler during the debate last night, I was naturally reminded of the 1953 confirmation hearings for Charles E. Wilson for Secretary of Defense. Wilson had been president of GM since 1941, overseeing both the company's transformation to wartime production and then its return to peacetime. Much of the confirmation hearing revolved around how he would sell off or insulate his financial holdings from his government job--and more broadly, the difficulties of separating his role at GM from the role of Secretary of Defense.

On January 15, 1953, Wilson had this famous exchange with Senator Robert Hendrickson, a Republican from  New Jersey:

"Senator Hendrickson. Mr. Wilson, you have told the committee, I think more than once this morning, that you see no area of conflict between your interest in the General Motors Corp. or the other companies, as a stockholder, and the position you are about to assume.

Mr. Wilson. Yes, sir.

Senator Hendrickson. Well now, I am interested to know whether if a situation did arise where you had to make a decision which was extremely adverse to the interests of your stock and General Motors Corp. or any of these other companies, or extremely adverse to the company, in the interests of the United States Government, could you make that decision?
Mr. Wilson. Yes, sir; I could. I cannot conceive of one because for years I thought what was good for our country was good for General Motors, and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country. Our contribution to the Nation is quite considerable. I happen to know that toward the end of the war—I was coming back from Washington to New York on the train, and I happened to see the total of our country's lend-lease to Russia, and I was familiar with what we had done in the production of military goods in the war and I thought to myself, "My goodness, if the Russians had a General Motors in addition to what they have, they would not have needed any lend-lease," so I have no trouble—I will have no trouble over it, and if I did start to get into trouble I would put it up to the President to make the decision on that one. I cannot conceive of what it would be.

Senator Hendrickson. Well, frankly, I cannot either at the moment, but we never know what is in store for us.

Mr. Wilson. I cannot conceive of it. I do not think we are going to get into any foolishness like seizing the properties or anything like that, you know, like the Iranians are in over there, when they got into ---
Senator Hendrickson. I certainly hope not.
Mr. Wilson. You see, if that one came up for some reason or other then I would not like that. I do not think I would be on the job; I think I would quit because I would be so out of sympathy with trying to nationalize the industries of our country. I think it would be a terrible thing. That is about the only one I can think of. Of course, I do not think that is even a remote possibility. I think the whole trend of our country is the other way."

I've quoted here from the transcript of the actual hearings as printed in "Nominations: Hearings before the Committee on Armed Services, United States Senate, Eighty-third Congress, first session, on nominee designates Charles E. Wilson, to be Secretary of Defense; Roger M. Kyes, to be Deputy Secretary of Defense; Robert T. Stevens, to be Secretary of the Army; Robert B. Anderson, to be Secretary of the Navy; Harold E. Talbott, to be Secretary of the Air Force ..." January 15, 1953.

But the hearing had been closed to the public, and the transcript didn't come out for a few days. When reporters asked what had been said, they were told that Wilson had simply replied: "What's good for General Motors is good for the country." Democrats picked up the phrase on the campaign trail and used it against Republicans for being overly pro-business. The highly popular Li'l Abner comic strip had a character named General Bullmoose who often said: "What's good for General Bullmoose is good for the U.S.A.!"

The story goes that for a few years, when the quotation came up, Wilson would try to offer some context, but after awhile he stopped bothering. When he stepped down as Secretary of Defense in 1957, he said: " "I have never been too embarrassed over the thing, stated either way."

Of course, it's interesting that the Democratic party that bashed Charlie Wilson back in 1953 now finds itself in the position of arguing the modern version of "what's good for General Motors is good for the country." For those who want details about the actual bailout, my May 7 post on "The GM and Chrysler Bailouts" might be a useful starting point.

Here, I would just make the point that while GM remains an enormous company today, it was relatively much larger in the 1950s. In the Fortune 500 for 1955, General Motors was far and away the biggest U.S. company ranked by sales. GM had $9.8 billion in sales in 1955, with Exxon running second at $5.6 billion, U.S. Steel third at $3.2 billion, followed by General Electric at $3 billion. The GDP of the U.S. economy in in 1955 was $415 billion, so for perspective, GM sales were 2.3% of the U.S. economy.

In 2012, GM's sales are $150 billion, but in the Fortune 500 for 2012, it now runs a distant fifth in sales among U.S. firms. The two biggest firms by sales were Exxon Mobil at $450 billion in sales, just a few billion ahead of WalMart. The GDP of the U.S. economy is about $15 trillion in 2012, so GM sales are now more like 1% of GDP, rather than 2%. And many of those who argue that it was in the national interest to give GM more favorable government-arranged bankruptcy conditions, rather than the usual bankruptcy court, would likely be quite unwilling to give bailouts to Exxon Mobil or to WalMart--despite how much larger they are.