According to news reports, Ron Bloom will join the Obama Administration’s auto industry task force, reportedly going to work as a senior advisor to the Treasury Department. A decade ago, he walked away from his job as a vice president with Wall Street investment banking firm Lazard Freres, a step many of his fellow Harvard MBAs may wish they had taken. He went to work as a special assistant and strategic advisor to Steelworker President Leo Gerard.
Bloom helped the U.S. steel industry survive its last major financial crisis in 2001, when surging imports from China and other countries threatened to destroy the steel and other basic U.S. industries. He helped consolidate and revive dozens of bankrupt steel and tire companies, making them profitable and saving thousands of jobs in the process. As United Steelworkers (USW) President Gerard pointed out, “He’s going to Washington to help the administration sort out the problems, and that’s his gift. Ron has been a problem solver. He has worked on 50 bankruptcies over the past 20 years. He has a lot of experience and knowledge. There’s a big problem-we want to save the auto industry in America-and that’s what Ron is going to help them do.
According to the New York Times, Bloom “is one of the nation’s foremost experts in the special, separate health plans for retirees” that the USW and United Auto Workers now have. In addition, he helped the USW greatly consolidate the number of job classifications in most steel mills, which contributed to significant increases in productivity. This experience could prove invaluable because, as Susan Helper of Case Western and John Paul MacDuffie of Wharton, who also co-directs the MIT motor vehicle project have pointed out, the companies’ greatest challenge may be the need to fundamentally change the way they work with employees and suppliers to bring about continuous improvements in the cost and quality of auto parts. Their research has shown that the compensation paid to UAW workers is responsible for only about 10% of the cost of a car, while supplied parts make up over half of a car’s value.
Helper and MacDuffie have argued that it would have been a mistake to appoint a “Car Czar”, as suggested by outgoing President Bush when, in one of his last official acts, he approved temporary bridge financing for the industry. The Obama administration was apparently listening, as they have now appointed a committee that will be headed by Treasury Secretary Geithner and National Economic Council director Lawrence Summers. Joining Bloom on the staff will be Diana Farrell, the President’s Deputy economic advisor who previously worked for McKinsey and Goldman Sachs.
Bloom believes deeply that unions are vital to American democracy, and one can expect him to understand and care about the workers’ interests when the bargaining gets tough. But ultimately, he will represent the people of the United States, and the Wall Street Journal notes that “people who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.” If the reports of Bloom’s appointment are accurate, the Obama Administration is off to an excellent start in rebuilding the U.S. auto industry.
