Who owns GM?

I’m a little bit disoriented by the news out of Detroit. GM was once a titan of capitalism, and is now a nearly incomprehensible joint venture which includes two national governments and a union healthcare fund. It isn’t even clearly socialism, and probably nobody on earth understands the whole thing.

And to make my head spin even more, Hummer is going to be sold to a Chinese firm. Hummer! The very symbol of aggressive American superiority and machismo, made in China! To enhance the humiliation, a GM plant will make Hummers for their new Chinese masters for a year or so. Somehow I think that the old “U.S.A.!” marketing approach is not going to work very well, now that Hummer is a case study in our collective inability to make anything anymore. The Hummer is a dinosaur, and it should have been dropped. Or maybe the Chinese know something I don’t about the rising global middle class and its rich sense of irony. Maybe they are looking forward to driving those beasts to rub our face in the declining Yankee empire.

But I digress.

My disorientation stems from a New York Times piece on the United Auto Workers’ unfamiliar new role in trying to pull GM and Chrysler back from the brink. Usually I am a merciless backseat editor, griping about lost opportunities to at least consider how cooperatives might contribute to solving our economic and financial crises. But here’s what’s got me interested in this article: It actually seems to focus too much on employee ownership for my tastes. There are four whole paragraphs tackle this issue, even taking a moment to compare UAW’s situation to the ill-fated employee ownership of United Airlines.

This is a useful comparison, to be sure. But what worries me is that this is a really ugly mongrel of employee ownership. Even without the deep and dangerous complexities of the emerging ownership structure, we are dealing with an imploding industry. Remember that taxpayers are putting at least $50 billion on the line for a best case scenario of 11 plants closing and 20,000 jobs lost, in addition to the damage caused by closure of over 1000 dealerships. This is ideally going to be ugly and painful.

There is also a good chance that it will end badly, and some may try to blame employee ownership for that. The main reason why this is not really a test case is that the employees won’t have control. Even in Chrysler, which will be 55% owned by the UAW fund, they will only have one seat on the board, and shares will be nonvoting. United’s ESOP at least had three seats and a veto over strategic decisions. The very structure of an ESOP is not a whole lot different than it would be if a bunch of workers banded together and invested in stock individually. One difference is that they don’t actually own the stock until they retire, but instead get a proportionate vote for how the trustee should vote for the collective bloc of ESOP shares. (Confused yet?) This is a far cry from a worker cooperative, in which every worker-owner gets an equal vote in governance of the firm.

The other issue is that there are apparently layers of separation between the UAW employees and any crumb of actual empowerment that they may enjoy. Rather than the ideal situation, in which everyone at a plant gets a vote about matters impacting that plant, power will apparently be conveyed via the whole union, whose interest is not even limited to running the company in question. There may even be a separate board that makes decisions on behalf of the retiree’s fund, separate from the union’s overall leadership (which is already somewhat distant from the rank and file).

Don’t get me wrong. I think that this is better than just letting GM fall (even if it ultimately falls anyway), but there are better ways to do this. Rather than the current scheme, which is very muddled and probably temporary, it would make sense to view firms that need government bailouts as opportunities to build true and democratic employee ownership. Rather than hand these firms back to whomever has been the most successful speculator in recent days (often day traders and real estate “flippers”), we should take a long-term view towards ownership structures that give power to those who are really invested in the firm.

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