Probably the most dramatic example of how things can impact future generations is World War I. The Great War. The so-called "war to end all wars."
Besides laying the groundwork for Hitler and Soviet communism, the First World War's resulting breakup of the Ottoman Empire has ramifications for us all to this very day. And looks to for quite some time yet.
But I'm not posting to re-fight wars past and present. I was, however, reminded of how actions taken (or not taken) can eventually burden those not even born when reading Roger Lowenstein's thought-provoking piece on General Motors (GM/NYSE) in The New York Times:
But none of G.M.’s management miscues was so damaging to its long-term fate as the rich pensions and health care that robbed General Motors of its financial flexibility and, ultimately, of its cash.
General Motors established its pension in the “treaty of Detroit,” the five-year contract that it signed with the United Automobile Workers in 1950 that also provided health insurance and other benefits for the company’s workers. Walter Reuther, the union’s captain, would have preferred that the government provide pensions and health care to all citizens. He urged the automakers to “go down to Washington and fight with us” for federal benefits.
But the automakers wanted no part of socialized care. They seemed not to notice, as a union expert wrote, that if Washington didn’t provide social insurance it would be “sought from employers across the collective bargaining table.”
Detroit was too flush to envision that it would ever face a financial strain. Ford and Chrysler signed identical pacts with labor, so all three automakers were able to pass on their costs to customers. Besides, the industry’s work force was so young that few workers would be collecting a pension any time soon.
But pension commitments last forever. They far outlived Detroit’s prosperity.
Lowenstein ends the article saying it is too late to restore GM's former grandeur. I don't believe it needs to do that to work out as a successful investment. It just needs to stop bleeding in North America. And like Rick Wagoner or hate him, the fact is he's trying to turn around a supertanker with problems not entirely of his making. GM managements before him made a string of bad deals with the UAW, starting in 1950.
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