The public outcry regarding the method of transportation selected by the big three auto executives to get to Washington two weeks ago, demonstrates the public's total cluelessness as to what the CEO of a supercorporation does.
I guess, given the current set of reduced circumstances among many members of the populace and the CEO's purpose in coming to Washington, it's understandable that some people would be upset. The spectacle of company executives begging the taxpayers to lend them $25 billion dollars because of their utter failure to keep their companies solvent while living the lifestyle of a sybarite is sure to increase feelings of enmity and jealousy. The proper thing for a beggar to do is to dampen his public display of luxury and leisure.
I ask you, what do you think when a collector drives up in a late model car and walks through your House of Worship with his hand out?
And yet, they are not begging for themselves. They have thousands of suppliers, tens of thousands of investors, hundreds of thousands of employees whose continued welfare depends on their ability to get bailed out by the government. They get paid large salaries but they have awesome responsibilities. They work many more hours a day than most workers and need that time to manage the vast empires for which they are responsible. If I were an investor in GM I certainly wouldn't want Rick Wagonner to waste precious hours sitting around an airport waiting to hop a plane that never arrives because of a traffic jam at DTW. A private jet would certainly save about 2 hours of his time which could be better spent running GM than sitting around and squirming.
One of my co-workers is convinced that CEO's do nothing for their pay. So why did Ford offer Alan Mullaly what they did to do nothing but sit around and play golf? The Ford family certainly didn't have any previous relationship with him that would justify such an arrangement. The obvious answer is that the job is a tough one and requires 24 hour dedication which sometimes isn't even enough.
Ah, but you say, "they're not doing a very good job, they made big SUV's and trucks and didn't make the little green cars that the whole world has been desperate to buy (not at current prices, though) for the last 6 months." True, right now everyone wants smaller cars. But the small cars aren't profitable and if the big three had made only small cars they would be in even worse shape than they are now. The trucks and SUV's were very profitable. No one could foresee the wild runup in oil prices. (The pundits are still predicting $200.00 oil like $1000 gold that has been predicted for the past quarter century.)
Many years ago, I heard a discussion which pointed out that the global auto industry would have overcapacity for many years in the future. Add to that
the big three's legacy costs their previous managements promised the unions, costs which the Japanese don't have, and you can see why they can't make money.
The country would have been better served had the news media not made such a stir about how these executives got to Washington, but at least the public got its schadenfreude.
So now they're all driving to Washington and working for $1 a year.
I wouldn't run a lemonade stand for $1 a year.
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3 comments:
I agree that the private jet thing was blown way out of proportion.
My issue with the auto company execs was on a completely different point.
Where was The Plan?
These guys showed up in Washington, hats in hand, looking for $25 billion. Yet, they had no information about what they would do, post-bailout. No restructuring plan, no before/after capital structure plan, no in-depth analysis of their cash burn rate, no mention of their sell able assets and their potential proceeds. Nothing.
These guys wouldn't dream of showing up at their bankers' offices, even for an initial organizational meeting, seeking 1/100 of the money they're asking taxpayers to provide, without providing more information than they brought along with them to Washington.
At least provide the government - and the taxpayers - a fraction of the courtesy you'd give to your bankers.
i'm all for getting paid for what you're worth but let's be honest with ourselves, is $21 million not a little overboard?
the big question i have is, what comes next? so we bail out the auto industry, are they set then forever or are they going to come back in a few months asking for more? does anyone actually believe that car sales are going to increase to the extent that we can manage to get the "big three" back on their feet again.
truthfully, the foreign car-makers are much better positioned right now to take advantage of the national trend toward better gas mileage. the one thing Detroit can benefit from is lower gas prices and deep discounts on their products. is that enough though???
I completely disagree with your sympathies towards these auto makers. Ford pays their line workers an average of $73 an hour while the Japanese companies pay $48. They obviously can not maintain a sustainable competitive advantage, of course they're performing poorly. Get with the program, this is a market economy. You offer a more expensive product -> you sell less. They deserve to tank.
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