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Ways of the World

Carol Stone, business economist & active Episcopalian, brings you "Ways of the World". Exploring business & consumers & stewardship, we'll discuss everyday issues: kids & finances, gas prices, & some larger issues: what if foreigners start dumping our debt? And so on. We can provide answers & seek out sources for others. We'll talk about current events & perhaps get different perspectives from what the media says. Write to Carol. Let her know what's important to you:

Monday, September 25, 2006

Henry Ford, Where Are You When We Need You?

If someone should decide to canonize a "patron saint of business", I've often thought Henry Ford would be a good candidate. He had outstanding technical skills and ingenuity, developing the assembly line method of manufacturing. More fundamentally, though, his vision of the organization of his company was perhaps the greater innovation. Mr. Ford thought the firm should build a simple, inexpensive car and pay the people who did the work well enough so that, amazingly, they themselves could afford to buy it. Indeed, he paid the then-unheard-of sum of $5 a day. This was a remarkable development, in effect democratizing automobile transportation and creating the mobile society of today. Over 19 years, from 1908 to 1927, the company made 15,500,000 of its famous Model T.

A Visionary Company . . .
This beginning and the subsequent decades-long performance of the company – during hard economic times as well as prosperous ones – led prominent management gurus James Collins and Jerry Porras to name the Ford Motor Company one of 18 "visionary companies" in their best-selling business book Built To Last, which was first published in 1994. These companies adhere to an underlying ideology and "vision" of their business that enables them to transcend fads and overcome the occasional glitch to survive for years and years; several were founded in the 1850s, Ford in 1903. Collins and Porras renewed this designation for Ford in the book's paperback edition, issued just four years ago in 2002.

. . . in Big Trouble
This dramatic historic background casts great irony on the present condition of the Ford Motor Company: unpopular products and burdensome labor costs are prompting a major contraction in the scale of the company's operations. A plan for this restructuring was announced last January; the program would close some plants and lay off excess salaried administrative personnel. But closing an auto or truck plant takes time, and this year market circumstances worsened rapidly for American automakers. Then, about two weeks ago, we learned that there would be a new CEO for the firm; bringing in some new energy at the top might help. And last Friday, September 15, the company announced a projected loss for this year of $6 billion, causing more plants to be closed on a faster timetable and a buyout program to be offered to every single one of the 75,000 hourly workers. This "acceleration" of the scale-down program would lead to layoffs for even more salaried workers and the suspension of already-reduced dividend payments to shareholders beginning in the next quarter.

Further, in a statement rare for a big company in a competitive marketplace, Ford conceded that sometime in the near future, Toyota is likely to overtake it as the Number 2 seller of vehicles in this country, behind only General Motors.

What happened? How do visitors to the Geranium Farm website have an interest here?

Ford Illustrates Economic Issues of the Day
What happened to Mr. Ford's company presents a good microcosm of economic issues facing us today: energy, the environment, health care and so on. In one of our early articles, we talked about energy; thankfully, prices have come down from their summer peaks, but Ford and GM in particular have a heavy weight of gas-guzzlers in their product mix and sales at both firms have suffered mightily as a result.

Rising health care costs have hurt Ford. The US auto companies have all had very generous health care plans which until very recently came with no out-of-pocket expense for the employee. Ford and General Motors have renegotiated this benefit, bringing to their employees the deductibles and co-pays so familiar to most of us. Some, especially union leaders, argue that a nationalized health system would be a major help for this problem. But – and you know you'll hear more from us about this – unless health care costs are actually reduced, all we get from nationalization is a change from an insurance burden to a tax burden of the same or greater magnitude. No easy solution here.

Ford's retirees are getting older and much more numerous. For a long time, "30-and-out" described the tenure associated with auto industry pension plans. That meant workers would begin to retire in their mid-50s and possibly draw pension benefits for as many as 30 more years – as long as their entire working career. This policy was affordable, like social security, when life expectancy was 65 or 70. But now, many folks live well beyond 80, putting a strain on pension programs that promise a fixed lifetime benefit. Financing everyone's retirement is another topic we'll have to work on here as well – and none too soon.

Finally, Ford faces the added competition from other global firms. How many of us drive a non-US brand vehicle? More and more. Even if it's built in a US plant, as is increasingly the case, the "foreign" firm has newer plants, a non-unionized labor force and few retirees, so it has lower labor costs and more efficient production facilities.

Solving Ford's Problems Will Teach Lessons to Us All
We’re not here to give management advice to Ford – and anyway, the latest dispatches from Detroit indicate that the new CEO is already hard at work shaking things up. We are here to highlight the fundamental role of such companies in our lives. Recall what we’ve mentioned here: Ford makes cars and trucks that we use for our personal transportation. This is just the beginning. The company gives work to tens of thousands of people, including many who work for suppliers and dealers as well as directly for Ford. The company offers opportunities to those people for personal growth and socialization as well as monetary compensation. That compensation takes the form of cash wages, certain paid time off, health insurance, retirement and other benefits. The company’s profits – when they earn them – are reinvested in new and better products and production methods. Companies, just as individuals, also donate some of their income to charities. Oh yes, they pay taxes, too. They are citizens in their communities.

Thus, analyzing and understanding what happened at Ford is only the first step in a complex lesson to be learned by managements, shareholders, employees, displaced employees, retirees and the health care industry, among other segments of society. We need to get a handle on many of the issues mentioned here, and as we do, these painful lessons can bring benefits to industry and also to the working and consuming public.

Saturday, September 09, 2006


"I'm totally unsentimental about that day in our . . . history, " a friend writes. Another friend says, "that's in the past; we are in the present and have to look to the future." "I don't know . . . " inserts a third, without any further elaboration.

These comments from people I respect formed a challenge to me as I looked toward the Fifth Anniversary of the September 11 attacks. They were reinforced by published interviews with some of the survivors who express a desire now to move on or to avoid going again through stories of The Day.

But grief is individual, and probably no two people adhere to exactly the same timetable. Other survivors, along with the visitors who come to the site every single day, are still very much in need of outlets for very strong feelings. I'm a survivor too and clearly belong in this latter group.

So I was heartened this morning in reading the statement for the occasion which was issued yesterday by the Presiding Bishop of the Episcopal Church. The printed version (it's in audio and video forms as well) is accompanied by a picture of Bishop Griswold inside St. Paul's Chapel a day or two after the disaster, inscribing a note; he's wearing protective clothing and a face mask. His current statement and the format of its presentation encompass both the significance of remembering that horrific time and the importance of using it as a guide in framing the way we move forward.

Bishop Griswold appeals to the Millennium Development Goals (MDGs) as an outline of an approach we can take. These were formulated by the United Nations and endorsed in June at the Episcopal Church's General Convention. We wrote a little about them here then. They aim at lifting the world's poor up from their dire poverty. We recommended a book called The Price of a Dream, and Mother Crafton and VivaBooks placed it in The Geranium Farm's inventory for you to buy through us. My comments then emphasized the conversations and the relationships the author has with the poor in the Bangladesh countryside and the reality of their poverty that comes across through his finely crafted text.

But there is much more to that book. It includes a solution. World poverty is big, and one solution, like one healing experience in the face of massive grief, doesn't begin to cover the entire situation. It is a step, though, and one, notably, that honors the personhood of each participant. The Price of a Dream explores the Grameen Bank, the institution that innovated "micro-credit", the granting of tiny, tiny loans to impoverished people – mainly women – enabling them to fix up their own home or start their own little tea stand or send their child to school. The challenge for them is repaying the loan, in even more minute installments; this means they must do something productive with the money so they will have the principal and add some interest. It works. People do live with less hardship; the quality of their lives is materially improved. Some who take more initiative can become employees of the Bank or attract other employers to hire them out of poverty. Perhaps with such a better existence, they won't fall prey to radical leaders who appeal to some extreme religious belief that forces them to do violence to others.

We can join in this kind of effort. The Grameen Bank model has spread, and among other institutions, Episcopal Relief & Development does micro-credit too. ER-D has other types of aid that also help people help themselves, such as "Gifts for Life", giving livestock for people to raise, not just to eat.

The Presiding Bishop again: "I can think of no better way to observe the passage of five years since the horrific events of September 11, 2001 than to commit ourselves, individually, as a church and as a nation to looking for new ways to pursue healing and restoration in the world God so loves. I can think of no better way to honor the memory of those who died on September 11 five years ago than by committing ourselves to working for a future in which the events of that day will not be repeated."

Give to ER-D: or directly to Gifts for Life. ER-D works right in the messiest places.

Donate to the Grameen Bank Foundation:

And to the Heifer Project, a 60-year-old organization in Little Rock, AR, that specializes in giving heifers and other animals to impoverished families around the world:

The Presiding Bishop's statement is at

And The Price of a Dream is available here.

God Bless You all on this hallowed day and may God find His way into the hearts of the terrorists, helping them to find a better life. Amen.

Friday, September 01, 2006

Labor Day

Just a brief note in honor of upcoming Labor Day. Today, in fact, the U.S. Bureau of Labor Statistics reported on the labor situation through August, and it contained some pretty good news about employment and unemployment. The proportion of the population who is employed, the "employment rate", increased to 63.1%, tying the highest rate since the 2001 recession was getting under way. Similarly, the unemployment rate eased to 4.7% from 4.8% in July, holding the low range of the last few months. The number unemployed fell by 86,000 to 7.1 million, down about 2 million from that recession's high.

Some press reports have bemoaned a perceived weakness in wages lately, but today's report showed that average weekly earnings are up 4.2% from a year ago. This is keeping up with inflation, which of course has been pushed hard recently by surging energy costs. Thus, workers are able to hold their own against those rising prices.

So things aren't too bad. It's not the boom times of the late 1990s, but it's a lot better for unemployment than any other time in the past 35 years. And the employment rate is far higher than even that late 1960s period, when fewer than 60% of working age people had jobs. We can also cite much broader opportunities for women and minority races.

Happy Labor Day!

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Almighty God, you have so linked our lives one with another that all we do affects, for good or ill, all other lives: So guide us in the work we do, that we may do it not for self alone, but for the common good; and, as we seek a proper return for our own labor, make us mindful of the rightful aspirations of other workers, and arouse our concern for those who are out of work; through Jesus Christ our Lord, who lives and reigns with you and the Holy Spirit, one God, for ever and ever. Amen.

The Collect for Labor Day
The Book of Common Prayer

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