Martian's Daughter: A Memoir

by Whitman, Marina von Neumann

  Perhaps the biggest difference of all was the ambiguity of my perspective, which, I soon discovered, was a mixed blessing. I had a double vision as an insider and an outsider, and that was both my strength and my weakness. Because I was one of the few at GM who wasn't born there, I brought a different perspective from those of employees who had started their careers at the company, but I was also continually being tested. I had to continually prove myself.6

  Although I didn't realize it at the time, the role changes that accompanied my move from Pitt to GM echoed the much more dramatic shift my father had made in midlife. Up until he became an American citizen and the US military began to ready itself for war, all his brilliance had been focused on various aspects of pure mathematics, and his fundamental contributions to the great scientific issues of the early twentieth century were largely individual achievements.7 From about 1937 on, his focus shifted to applied mathematical research in the military field and in numerical analysis, computers and automata, as well as the application of game theory to economics, all of which involved working as part of a team.8 He was sometimes criticized for having abandoned the purity of abstraction for the messy problems of the real world, but, convinced as he was that he was fighting a battle of Armageddon, he expressed no regrets.

  My situation was hardly comparable to my father's, but I did decide almost immediately after I arrived at GM to work at changing the role of the chief economist from providing economic data and analysis, as well as material for speeches, to the chairman and the financial staff to producing output that could be useful to the operating units, the profit-making side of the house. My personal focus would be, I told myself, to explain the world to GM and GM to the world. But I quickly discovered, to my dismay, that this shift meant coming to terms with GM's deeply embedded and profoundly dysfunctional culture.

  Maryann Keller, an astute observer of the automobile industry, summarized GM's self-destructive attributes as a Goliath complex, a parochial worldview, leadership by the numbers, and contemptuous paternalism.9 To this list, I would add the incredible isolation of the company's top executives, the inhabitants of the legendary fourteenth floor of the GM Building in Detroit.

  General Motors had long been accustomed to being the largest automobile company in the world, and the belief that the economies of scale arising from its size were a fundamental source of competitive advantage ran throughout the company. I heard Roger Smith opine more than once, and in all seriousness, that being CEO of the largest firm in the United States should entitle him the highest compensation of any chief executive, regardless of how the company's profitability stacked up.

  The GM I joined in 1979 was proud of being known as a midwestern car company. The Midwest was its world, and its lack of understanding not only of its Japanese competitors' sources of strength but even of its own customers' attitudes was devastating. It did make use of a standard market research tool, focus groups of potential customers, but it did this so late in the design and production cycle of a new model that, as I commented in frustration, practically the only thing that could still be changed on the basis of their comments was the color of the seat covers.

  Since the late 1950s GM's chief executive had almost always been drawn from the ranks of the finance staff, whose members were the company's elite: recruited from the best schools, afforded the highest pay scale, and responsible for coordinating information and decision making for top management. Because their primary attention was to the numbers in making product and investment decisions, the concerns of designers and engineers were too often pushed aside. And these financial “hi pots” (high-potential employees whose careers merited special nurturing) were skilled in the art of making the numbers support whatever decision the chairman favored.

  Coming from the ruthless up-or-out tenure system that governed faculty appointments at major universities, I was astounded to discover how rarely anyone was fired at GM. The job security enjoyed by blue-collar workers, with generous benefits guaranteed at the end of a lifetime career, extended to salaried staff and even to the executive level. Incompetence in the higher ranks might prevent someone from being promoted, or even lead to being shuffled off into a backwater position, but the company's paternalism was near-certain protection against being shown the door. When Elmer Johnson, newly arrived as an executive vice president, tried to institute a rigorous evaluation system that called for dismissing those who ranked at the bottom of the curve, his effort was short-lived; although the chairman never explicitly overruled Elmer's innovation, the old practices crept back. And the talented African American factory manager Elmer had installed as personnel vice president to execute the new system soon left the company.

  Transported by GM drivers (no one used the “foreign” word chauffeurs) in late-model GM cars into the private garage under the GM Building, the company's top executives ascended by a private, key-operated elevator to the fourteenth floor, where their area was protected by two sets of heavy, electronically locked doors, a security guard, and a receptionist. They lunched together in their private dining room—actually, there were three levels of executive dining rooms in the building—and could leave at the day's end uncontaminated by contact with the ordinary mortals who ate in the large cafeteria on the first floor.

  These executives were isolated not only from the rest of the world but from each other. Their offices were all along the same corridor, but there was no spontaneous popping in and out or casual talk around the water cooler. The door to each executive's office was generally closed; in order to enter, one had to make an appointment and be admitted by the secretary who sat on guard in the outer office. This protocol didn't apply, of course, if the visiting executive stood above the visitee in the corporate hierarchy, and a summons from one's superior always sent the recipient sprinting down the hallway.

  This was a culture that provided an effective bulwark against reality. With their heads planted firmly in the sand, the majority of GM's top management clung stubbornly to their belief in a stable, reasonably predictable world. The incursion of new Japanese competitors who happened to be in the right place with the right kinds of cars when the oil shocks hit was seen as a temporary or at least reversible aberration. For most of them, furthermore, the only vehicle market that mattered was the one in the United States, which accounted for some 70 percent of GM's production and sales. The idea that the markets and the competition relevant to the company's fortunes were rapidly becoming global was foreign to their thinking.

  The picture of the world I tried to persuade GM's management and directors to accept was very different. I began by shifting my staff's forecasts and analyses away from treating the United States as a basically self-sufficient economy, onto which international trade and investment were tacked almost as an afterthought, to seeing it as fundamentally interdependent with the rest of the world. In the decades immediately after World War II, when exchange rates were fixed, foreign competition had not yet revived, and very little capital moved across international boundaries, a decision by the Fed to push interest rates up had affected GM mainly through a drop in total vehicle sales. Sales fell both because Americans cut back on spending in general and because the cost to automobile dealers of financing their inventories and to customers of financing their car purchases rose.

  In the more financially integrated world of the early 1980s, in contrast, the sky-high interest rates that resulted from Paul Volcker's determination to break the back of double-digit inflation brought funds pouring in from abroad. With exchange rates no longer fixed by governments, this capital inflow caused the dollar to appreciate relative to other major currencies, making imports cheaper and exports more expensive and putting GM's products at a competitive disadvantage vis-à-vis imported vehicles. Both the business risks and the appropriate responses were different in an economy that was now far more open to the outside world.

  I made these points over and over again in presentations to the top management and Board of Directors before this int
egrated worldview sank into minds that found it strange and unfamiliar. Some of GM's shareholders took real umbrage at my internationalist perspective, writing angry letters to the company protesting the appointment of Marina Whitman, a member of two “treasonous” organizations, as a vice president of their company. One of these organizations was the Council on Foreign Relations, since its establishment in 1921 the incubator and home base of America's East Coast foreign policy establishment—most secretaries of state, many other cabinet secretaries, and several US presidents have been members. It was a men-only club until the 1970s when, fresh from the CEA, I was one of the first women to join.

  The other object of the shareholders' anger was the Trilateral Commission, a group of 150 high-profile members, equally divided among North America, Europe, and Japan. It had been founded in 1975 by David Rockefeller, with the aim of pulling Japan, our former adversary and by then an important ally, solidly into the ambit of the “Western” world. No one could fault the commission's organizers on their ability to select as members the rising political leadership of the United States. The winner of the 1976 presidential election, Jimmy Carter, his two major opponents, John Anderson and George H. W. Bush, and 26 senior appointees in the Carter administration were all members, as were Walter Mondale, Bill Clinton, and numerous high-ranking members of subsequent administrations, both Republicans and Democrats.

  The powerful positions occupied by members of both organizations, and especially the fact that David Rockefeller, the multimillionaire head of Chase Manhattan Bank, was a leader in both of them, strengthened the spread of conspiracy theories. On the left, both the council and the commission have been suspected of existing to further global business and banking interests at the expense of ordinary folk. On the right, they have been accused of promoting world government and chipping away at the sovereignty of the United States. Some of the more paranoid opponents of the internationalist outlook they represent have even spread rumors of a secret fleet of black United Nations helicopters poised to invade and take over the United States.

  My views about the integration of the global economy didn't shake the complacency of GM's senior executives until I laid out the implications in more detail. In op-ed pieces in the New York Times, I hammered home the idea that the trend toward more fuel efficient cars was worldwide, and that the bottom line would almost certainly be a stepped-up pace of innovation and competition in an increasingly global—rather than national—automotive industry.10 Furthermore, I pointed out, the two oil shocks were producing both an uncomfortable transition from cheap to expensive energy and a diffusion of economic power toward newly industrializing countries.11

  With these pronouncements, I was striking at the heart of GM management's long-held beliefs. “You're exaggerating,” the vice chairman said testily after he'd read these opinion pieces in the predigested selections of newspaper clippings that were handed to the top executives every morning by their drivers as they got into their cars. “You'll see; these changes won't last, and customers will shift back to GM cars.” My entire career at GM was marked by growing frustration as my economist colleagues and I were unable to persuade our top decision makers that competition from foreign producers was here to stay and would only intensify. As I, along with a few other brave souls, repeatedly tried to bring the fast-changing competitive dynamic to bear on senior management's thinking, I felt like the princess of Greek myth, Cassandra, whose dire warnings about the true nature of the Trojan horse were fated to be ignored, resulting in the destruction of her father's kingdom. My father's Cassandra-like observations, in the early 1930s, about Europe's coming fate had proved all too accurate; was I fated to be just as prescient, and just as helpless to change the outcome, I wondered?

  Ironically, among these would-be changers of the culture was Roger Smith himself, the individual most often blamed for GM's downfall. Although our motives and ways of going about it were very different, we were both among the handful of executives who saw the future and tried to jolt the company into adapting. As I look back on these efforts, I'm reminded of my father's long-running battles with the military bureaucracy as he fought to ensure the United States' military superiority in the Cold War. The big difference was that my father and his allies were successful,12 whereas Smith and I, along with other would-be reformers, failed to break GM's mold of inertia and complacency.

  Roger Smith had started trying to change some aspects of this GM culture even before he became CEO. As early as 1974, as executive vice president, he had formed a small group to develop the broad, long-range strategies for the future that the company lacked and enticed a far-thinking, British-born engineer named Mike Naylor away from another GM division to head it. But old habits die hard. The operating people, focused on building and selling cars, strongly resisted what they saw as the pie-in-the-sky abstractions of strategic planning.

  Soon after I started at GM, Mike and I invited several group vice presidents to take part in a standard strategic planning exercise. It consisted of showing the audience a matrix of several strategies and scenarios and then asking them how their ranking of the various strategies would change under different scenarios. How, for example, would their ranking of strategies change if the auto companies were to find themselves in a fully regulated industry, like public utilities? Or how would they react if the price of a gallon of gas, which had just risen above a dollar for the first time, were to rise to three dollars?

  But these group vice presidents refused to play ball. Rather than thinking seriously about how they would act in such situations, they nodded in agreement with the colleague who said, martini in hand, “Aw, come on, I'm not going to waste my time thinking about that stuff. That's never going to happen. If it did, oh hell, I'd retire and move to Florida.”13 Naylor and I tried to come up with different approaches. But we never did find a way to unlock their thinking. And by the time those scenarios turned into unimaginable reality—when gasoline prices spiked above three dollars, vehicle demand imploded and, eventually, government intrusion into all major decisions was the quid pro quo for using taxpayer money to rescue GM and Chrysler from financial collapse—all those executives were long gone to Florida or the great beyond.

  Once he became CEO, Roger Smith tried other ways to crack open the inflexible GM culture. Traditionally, the route to the company officer ranks was through promotion from within; Smith took an unprecedented tack by recruiting outsiders who had reached high positions in their own fields to join the company at the level of vice president. Eventually, these would include Betsy Ancker-Johnson, a physicist who had been deputy director of Oak Ridge National Laboratory, to head the Environmental Activities staff; Bob Frosch, another physicist, who had run the National Atmospheric and Space Administration (NASA), as chief of the Research staff; Steve Fuller, a highly regarded professor at the Harvard Business School, to head the Personnel staff; Elmer Johnson, a high-profile corporate lawyer and adviser to leading corporations, as executive vice president and general counsel; and myself as chief economist. Roger's effort to bring in fresh thinking was genuine, but every one of us outsiders in the end retired or left the company frustrated by what he or she saw as a failure to break through the old boys' network and make a significant dent in the way the organization thought and operated.

  Smith's attempts to bring the outside world into GM didn't stop with recruiting individuals. In the course of his chairmanship, he brought both Electronic Data Systems (EDS), along with its founder, Ross Perot, and the Hughes Aircraft Company into the GM fold. He had various reasons for making these breathtakingly expensive purchases, but among them was the hope that EDS's aggressive culture and the innovative high-tech atmosphere that prevailed at Hughes would have an impact on GM's bureaucratic style. But although both these acquisitions proved to be huge financial successes for GM when they were sold or spun off as separate entities once again, neither was ever functionally integrated into the parent company or stimulated the cultural change Smith had envisioned.


  General Motors' hidebound culture was a many-headed Hydra. During one of my weekly trips to Detroit, I discovered a group of about a dozen economists, entirely separate from the Economics staff, called Legal Economics. Its sole function was to produce a book laying out the arguments against breaking up GM, in case a renewed spate of antitrust suits, such as had occurred during the 1960s, were to raise that possibility. Although the US Senate had held hearings in 1968 on whether GM constituted a monopoly and should be broken up, by the time I arrived on the scene a decade later, the rapid buildup of Japanese competition had made such a threat one of the least of GM's problems.

  I managed to persuade my boss, who also had Legal Economics under his wing, that it should be dismantled, and that I couldn't imagine any useful role for its director, whose professional skills were hopelessly outdated. Since our common superior, an amiable Canadian, was clearly unwilling to take on the unpleasant and, at GM, almost unheard-of task of firing someone, I said I would deliver the message. But I hadn't counted on his giving the man a raise just before he sent him down the hall to my office to get the bad news. The unhappy ex-director was both confused and infuriated by this mixed message and took out his anger on me, the bad cop in the farce. When I confronted my boss with the situation he had created, his explanation was “I felt sorry for the guy.”