I know that one of the prime adages of the media reform movement goes something like that if your first issue-of-interest is not “fixing the media,” then it should be your second. Can that sometimes work the other way around? With respect to recent developments in the auto industry, I would argue yes.
Since 1997, the year I started writing online, I’ve been the (somewhat) proud owner of a Saturn SC2. Not the most perfectly-built car (at least it looks fast). I just flipped the 108,000 mile-mark on it this weekend; I drove it off the lot with just 215. It’s the first and, perhaps, the only brand-new car I’ll ever own. Now, General Motors has gone into bankruptcy, and as a part of this move it’s spun Saturn off to a third party (so at least I’ll still get parts and service). That’s nice. It’s the rest of GM I worry about.
The down-and-out, once-king of Detroit announced last week that its new Chairman and Chief Executive Officer would be an old friend: Ed Whitacre, Jr. Remember him? Former CEO of AT&T? Not ringing any bells yet?
How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?
The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!
That was from an interview with BusinessWeek magazine in November of 2005. With that, Ed Whitacre singularly ignited the telecom policy-firestorm of the decade – the debate over network neutrality.
Whitacre’s major achievement during his 17-year tenure at AT&T was to rebuild Ma Bell, first starting off with SBC, then acquiring Pacific Bell, Ameritech, BellSouth, Cingular, and, finally, the AT&T brand itself. AT&T is now the largest Internet Service Provider in the country; basically, nobody’s data doesn’t flow through the AT&T network at some point. We all found that out the hard way when it was disclosed that the company secretly let the U.S. government mass-wiretap its citizenry in the name of “national security.” Currently, it has the iPhone nicely locked down.
It was only after creating a virtual oligopoly in the telecommunications (and especially ISP) market that Whitacre could boldly stand up and make the claim that nobody would use “these pipes” for free – even when we were (and still are) paying for them already (some of us twice, like me, both as an online content producer and consumer). It was Whitacre who flew the trial balloon for the notion of tiered/metered bandwidth consumption, content discrimination, and all that jazz.
To be perfectly clear: Whitacre and his ilk underinvested in his industry’s infrastructure to create artificial scarcity in the marketplace in order to increase revenue and profits. When he left AT&T in 2007, he left behind a telecommunications industry that, relative to global indicators, was (and is) still stuck in the late 20th century.
In taking the wheel at General Motors, Whitacre admitted that he knows nothing about cars: “I guess I’ll have to learn something about cars, other than how to drive them.” (Then again, he’s openly admitted to not knowing much about computers, either.) But not to worry: “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”
If by “business” you mean mergers and acquisitions, well, sure, he knows how to do that. It’s how he built his fame and fortune. But the auto industry? No built-in quasi-monopoly on the product to start with? What will Whitacre’s GM gobble to fix its problems? Toyota? It is difficult to envision Ed and friends buying their way out of GM’s predicament.
However, it’s not completely insane: he was appointed by the Treasury Department, which is overseeing GM’s bankruptcy-purgatory and now owns a controlling share of stock. Heaven knows just how much taxpayer subsidy Whitacre may wring out of the government as he “rebuilds” GM; he was chosen in part, after all, because of his well-connectedness in Washington, D.C.
Perhaps it’s because he’ll work on the cheap? While his new position’s compensation has not been disclosed, Ed Whitacre left AT&T with a platinum-threaded, diamond-encrusted parachute worth north of $150 million (the total really depends on how long he lives – he still gets a minimum of $5.5 mil a year from AT&T in pension, plus all benefits and perks from the old gig, for life – and most of it tax-free), while AT&T’s workers got screwed. This does not count the tens, if not hundreds, of millions of dollars he’s already cashed out on in selling AT&T stock.
Given Ed Whitacre’s track record at AT&T, this decision doesn’t seem to make much business sense, and definitely shakes my faith in “change we can believe in.” Those of us who lived through the Whitacre years in telecom definitely need to drop some knowledge on somebody in power about what we might expect of the “new” General Motors. So long as that guy’s in charge, I’ll never buy another GM vehicle again.
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