Martian's Daughter: A Memoir (38 page)

Society's expectations of the industry, reflected in countless regulations, were increasing every year. And the influx of Japanese vehicles, in addition to sharpening the competition for customers, brought with it better average fuel efficiency than GM and Ford, with their traditional reliance on larger vehicles for profitability, could match. And, although many of the innovations in safety, pollution control, and fuel efficiency had been developed by General Motors, these features didn't always promise a rapid return on the investment needed to put them into its vehicles. So the company headed by Roger Smith, a finance man in every fiber of his being, dragged its feet on introducing many of these improvements into its cars and trucks.

During a period when cost reduction took primacy over other goals and later, when the company's new president, Lloyd Reuss, announced that GM's policy would be to lag rather than lead in introducing safety and fuel-efficiency advances into vehicles because “that's not what the customers care most about,” Jim was forced into an awkward position. He insisted that the company should resist admitting the reality of man-made global warming well after most climate scientists, including his
colleague Betsy Ancker-Johnson, were persuaded of its existence. I tried to convince him to acknowledge the growing evidence, but his stubbornness on the matter, combined with the primary role he played in defending the company's interests on a wide variety of policy issues, put him at odds with my efforts to make GM's management see realistically the challenges its future held, and to persuade the outside world that the company was playing a role in environmentally friendly innovation.

The person I brought in to succeed me as chief economist was George Eads, then dean of the School of Public Policy at the University of Maryland and formerly high up in the Antitrust Division of the Justice Department. George had both a superb analytical brain and, it turned out, some creative views on how to streamline the Economics staff while making it more efficient and effective. He also had something I lacked: a lifelong love and expert knowledge of cars. But George's interest in public affairs issues took a backseat to his desire to move to a line job with responsibility for one of GM's business units. His openly critical mind did not fit comfortably with the GM culture, and when he saw that he wasn't going to get the kind of position he craved, he left GM, a disappointed and frustrated man.

Jack McNulty, the vice president of Public Relations, was a very different sort. A hard-drinking, florid-faced man with a hard-edged New York accent, he was outspoken in expressing views that made his listeners shudder. He made no bones about the fact that it didn't sit well with him to report to a woman, although he would do his best. His thoughts on how to reach out to potential African American customers were that they were “a great market for used Cadillacs.” He encouraged the three-martini lunch, by example as well as quips, and I discovered that the alcoholism rife in his staff was a subject of crude jokes among the Detroit-based press corps. My efforts to change this destructive environment came to naught, at least partly because I couldn't get support from those above me in the chain of command.

I realized how big a problem I had with trying to integrate the Public Affairs staffs into a meaningful group when I found it almost impossible to call a meeting with the four vice presidents. Basically, each wanted to be left alone to manage his or her own staff in pursuit of the goals outlined in its business plan. My efforts to hold monthly meetings to talk
about ways to maximize synergies so as to make the whole group more effective met with fierce bureaucratic resistance. Something more important invariably interfered with any schedule I tried to set, and I had to demand attendance, which flatly contradicted my effort to position myself as a leader and facilitator rather than a command-and-control boss. When downsizing became a companywide exercise, each vice president offered good reasons why the reductions should come from somewhere other than his or her own staff. I managed to keep my composure during these discussions but in the privacy of my office, I pounded the desk and mumbled profanities to vent my frustration.

The GM culture confronted me everywhere I turned. Jack McNulty ostensibly reported to me, but his real role was as Roger Smith's personal publicist. Roger was extremely conscious of his public image and very defensive about anything that might cast him in a negative light. That set the tone for GM public relations. Any journalist who dared to write something critical about GM or its chairman invited the threat that the company would withdraw its advertising from the offending publication, which it often did. Company spokesmen responded to difficult questions with carefully worded boilerplate.

One of Public Relations' toughest challenges was caused by the wide release in 1989 of Michael Moore's first hit film,
Roger and Me
. Moore used a combination of manipulation, caricature, half truths, and brilliant comic timing to contrast Roger Smith's pampered lifestyle with the abject misery into which GM's decision to close several plants had cast the citizens of Flint, Michigan. The movie was a sensational hit, setting Moore and his signature baseball cap on the road to fame and fortune. When a reporter asked for GM's reaction to the film, a spokesman replied haughtily that no one in GM would stoop so low as to buy a ticket!

Another major confrontation with the Public Relations staff arose when it didn't take kindly to my attempts to enforce a GM rule that forbade employees from accepting gifts of significant value from the firm's suppliers. The general knowledge that the company's chairman had enjoyed several excursions on Malcolm Forbes's luxurious yacht and had been a guest at his multi-million-dollar birthday bash in the Arabian desert, despite the fact that GM was a major buyer of advertising space in
Forbes
magazine, undermined my efforts. Things came to a head at the
splashy Teamwork and Technology show, a pet project of Roger's, which highlighted GM's innovations and current and future products, held at New York's Waldorf Astoria hotel.

When I arrived in my room, I found an enormous box from Tiffany's and, nestled inside, a very expensive Steuben crystal vase. My first thought was “That will make a fine wedding present for someone.” Then came my second: “Good Lord, we're not allowed to accept these from the hotel that's selling us the space and services for our show.” A call to the manager elicited the information that every GM executive in the hotel had received the same gift. “Well,” I said, “you'll have to figure out how to take them back.”

The result was a knock from housekeeping on every executive's door. Where rooms were empty and the gifts still wrapped, they were retrieved. But no one, including me, had the nerve to insist on recapture when it required a face-to-face explanation, so a few vases escaped. When we got back to Detroit, my vice presidents had to listen to yet another explanation from me about the rules forbidding gifts, and, to the best of my knowledge, the practice more or less halted among those who reported to me. But the chairman's proclivity for setting himself above the rules continued to pervade the corporate culture, behavior that flew in the face of the values I had been taught to regard as basic.

Meanwhile, I used talks, interviews, op-ed pieces in leading newspapers, and congressional testimony to fulfill my personal role as both a nag inside and an advocate outside the company. The world I described on the other side of the “windows out” was being shaped by the rapid globalization of the automobile industry; the increasing diversity of the many publics, or stakeholders, with which GM interacted; and the heightened expectations for corporate good citizenship. These developments demanded that GM find creative ways to integrate its business goals with political and social agendas. The competition from Japanese producers was just the beginning, I warned, as more and more developing nations—of which Korea was the first—were positioning themselves to join the competitive fray. And, finally, the success of the Japanese-owned “transplant” facilities in the United States should have hammered home the message that geography is not destiny, that it is management that bears the primary responsibility for competitive success.

One of my most important tasks as an advocate for GM—the “windows in” part—was testifying before congressional committees and subcommittees. Every detail of these hearings was designed to intimidate the witness, who sat at a wooden table, facing the committee members. These inquisitors were ranged along an elevated dais well above our level, forcing us to look up constantly as we read our scripts and reminding us, as if we needed reminding, where the power lay. The committee chairman gave each witness a strict time limit, often reinforced by a light that changed from green to yellow to red as the deadline approached. I learned not to take either one questioner's encouragement or another's withering hostility personally; what mattered was not me as an individual on the dock but the position or interest group I represented and how my questioner could best score his own points with the audience and, more important, the next day's newspaper accounts.

The subject on which I testified most often was the Corporate Average Fuel Economy (CAFE) standards, which required each manufacturer's fleet of vehicles to meet or exceed a specified average miles-per-gallon number. During the decade in which these requirements were being phased in, from 1975 to 1985, fuel prices were generally high or rising, pushing customers to want smaller vehicles, and the US manufacturers had no difficulty in meeting the steadily tightening mileage standards. The average mileage of passenger vehicles doubled, from 13.5 to 27.5 miles per gallon, and for light trucks it increased by more than 50 percent.
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But when gasoline prices fell, in the second half of the 1980s, customers once again favored larger and less fuel efficient vehicles. Then the standards began to bite hard on full-line producers like GM and Ford, which were torn between the mileage requirements and the desire to stem their decline in market share by selling more of the larger and more profitable vehicles customers wanted. Meanwhile, our Japanese competitors, whose production was naturally weighted toward the smaller vehicles suited to their crowded home country, faced no such difficulties and, in fact, had room under the standards to make their fleets
less
fuel-efficient by moving up-market to larger, more luxurious vehicles.

I testified in favor of loosening the CAFE standards more times than I care to remember, but the main points of my argument were always the same: that the standards failed all three relevant criteria, being neither
effective, efficient, nor fair. Just about every economist who has looked at the issue agrees that specific “command-and-control” regulations like CAFE are the least desirable and costliest policies to use in pushing to maximize energy security and/or minimize production of the greenhouse gases that contribute to global warming. In fact, gasoline consumption per capita actually rose in the United States during the 1980s, as consumers more than offset increases in fuel efficiency by acquiring more cars per family and driving more miles in the course of a year.
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A broad-based energy tax, I argued, would create the right signals to influence consumer behavior and would meet the triple test that CAFE failed.
⁴

I got to play offense rather than just defense as an advocate for the US automakers when I was appointed by President Reagan to the private-sector advisory group to the US Trade Representative. I stressed that what American manufacturing industries needed from the US agency charged with trade issues was, above all, a reduction in uncertainty through stabilized rules, along with pressure on other countries to open their markets to US products and eliminate burdensome “performance requirements.” These requirements, imposed mainly by developing countries, demanded that any foreign firm that wanted to produce and sell there had to meet a number of rigid conditions such as generating a specified volume of exports or employing nationals of the host country as a required share of its workforce.

My biggest impact on US trade negotiations, though, came in the task force formed to lay out objectives for the negotiations with Canada and Mexico that culminated in the North American Free Trade Agreement. My efforts were focused on ensuring that the provisions related to the automobile industry, which dominated US trade in manufactures with both Mexico and Canada and was treated as a special case in the agreement, met the demands of the Big Three American auto firms. These companies were ultimately successful in achieving provisions that treated them favorably in comparison with their Japanese competitors, while at the same time phasing out most of Mexico's rigid performance requirements.

I found myself playing an ambassadorial role within the company as well when I became secretary of the Public Policy Committee of GM's Board of Directors, the committee charged with monitoring GM's outlook and behavior on important issues of public policy. This seemed like
an ideal assignment for someone with my interest and background in relationships between public issues and the private sector. But it was marred by the fact that my role as liaison quickly turned into that of mediator in an ongoing struggle.

The tension arose from Roger Smith's determination to keep GM's board under iron control, by making sure that it received only the information he wanted it to have and allowing virtually no time for discussion in board meetings. He also attended the meetings of those board committees he regarded as important, to ensure that no potentially troublesome discussions bubbled up from them. He didn't bother to attend meetings of the Public Policy Committee, which he regarded as the least relevant to the actual running of the business. In assigning the committee responsibilities of each outside director, he allocated to the Public Policy Committee not only people with a genuine interest and expertise in issues like safety, environmental impact, protection of employees, and relationships with plant communities but also those who he thought might be troublemakers on more important committees. Chief among the latter was Ross Perot.