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Tuesday, November 25, 2008

Snakes On A Plane

In part two of the Bailout Blues entry entitled, “Bailout, Bailout, Wall Street Let the Bear Out” I wanted to focus solely on the three numb nuts from the auto industry. It seems someone forgot to invite them to the bailout party and now they want their share. Years of fat paychecks and reliance on high priced oil has led to a decline in auto sales. GM turned resources away from fuel efficient models and funneled them into redesigned trucks and SUVs. Oil went up and sales went down. With that went profits as well. Instead of hacking away at the top (like Executive salaries), they start by laying people off at the bottom and cutting back production. The only thing they did get lucky on was fixing their underfunded pension problems from the earlier part of the decade to produce a surplus. But now, that surplus may be needed to keep them afloat.

This past week, Moe, Larry, and Curly....(actually, it’s more like Shemp since Nardelli just showed up last year) went to Washington to ask for some of the bailout funds. While people travel everyday by commercial airlines and pay high ticket prices and baggage check fees for around $800, these three yahoos decide to use their corporate jets to fly to D.C for about $20,000. I’m sorry, but did anybody bother to tell them why they needed the money or did they just figure they felt left out? When I was in college there were a lot of pan handlers out on the main road through campus. They’d stand there and ask for change as you walked by to class or the bar. On occasion, I did offer up a few bucks, but they failed to realize that they were asking college kids. We have no money. And while they did that, they wore $150 Nikes. Hey, pal, you might want to look the part. If they (The Big Three D-bags) expected to be taken seriously, they should have carpooled to D.C. driving a hybrid. So, onto Washington, pinky ring adorned hands out, looking for cash and finally someone cowboys up.

"You traveled in a private jet? I'm not an opponent of private flights by any means, but the fact that you flew in on your own private jet at tens of thousands itself dollars of cost just for you to make your way to Washington is a bit arrogant before you ask the taxpayers for money."

Rep. Patrick McHenry said what everyone else was thinking. Then, others got in on the act and pretty much blasted the CEO’s hollow pleas for money wrapped up in a snappy commercial for their autos. Then David Scott volleyed this non sequitur, the Titanic’s biggest problem wasn’t the collision with the iceberg. I can only imagine the room got silent for a second and then everyone kind of nodded and understood the analogy. Mouthpieces for the auto makers pleaded that they had already done everything they could to stave off bankruptcy. At that moment, the deafening sound of an alarm went off and Wagoner reached into his pocket to push the “alarm off” button on the key ring to his jet.

This time, the snakes can walk

Here’s my favorite part. To lessen the already glaring injustice of having three multimillionaires show up on private jets asking for a handout they were asked if they would be willing to take a salary cut leaving them with $1.00 a year. I’d love to see the W2 forms on that. Wagoner said he didn’t have a position on that at the time. Mulally understood the sentiment but said he’s fine where he’s at financially. Nardelli said he would. Oh, wait. He already did that a year ago. So, it’s not like he’s going to lose anything more. In fact, don’t feel bad for the guy, he got a severance package from his previous company, Home Depot to the tune of over $200 million dollars. Even though his current total compensation is a mystery beyond the $1.00 salary, I’m sure he was given other forms of compensation. For that matter, none of the big three CEOs make more than $2 million dollars in annual base salary. They make more than 50% of their total compensation from bonuses and other sources. Wagoner totals just over $14 million and Mulally rakes in the most with $21 million. In my best Belloq voice, “I’m sure he’s very comfortable up there. That’s right, isn’t it. He’s very comfortable up there."

Look, I understand that as a CEO you have a very prestigious and high ranking position in a company. You’re the boss. With that position comes a pretty decent pay grade. But that doesn’t give you the right to be a douche bag and lay off hard workers and steal the pensions of those who have worked for a company for 30 plus years. That’s employee loyalty. CEO’s come and go at a fraction of that time. They seem to come in, puff out their chest, take the golden parachutes and jump out of the plane. Let me clue you in to what a real CEO or founder of a company does when his company is in financial trouble. The company I work for started in the home of our founder. He wanted to develop devices to help patients tolerate treatment better. After he got up and running as an established company he found himself in some tough times. He and a few of his backers managed to forgo their own salaries just to make sure they made payroll. He cared that much about the people to take his pay and give it to his employees and to pay his bills in order to keep the doors open. For 32 years the company stayed in business. Some companies decide, in times of financial crisis, that it is best practice to reduce the work force. I know that the founder of a fledgling private company and the CEO of a multi billion dollar company are two different things but it seems to me that if you take care of your infrastructure and keep the foundation solid, growth can occur without weakening the base. If you over inflate the top, the tower falls over. This is why I'd never do well as a business major.

Now, if it wasn’t for the failing economy’s dependency on the auto industry, I’d say let them fail. I'm not even talking about the buying of cars, but the auto industry employs so many people and that is a lot of jobs to eliminate putting unneeded stress on an already growing unemployment rate. But, just like the housing and credit market, it has to work from the bottom up. The consumer has to purchase a car to help shore up the company. Again, there isn't enough bailout money in the world to give each and every individual, in America, over the age of 16 a check to go buy a car. I don't have any suggestions other than the obvious. Get rid of the Big Three's paychecks, bonuses, and other compensation and funnel that into the companies as operating capital, payroll, benefits, pensions, and restructure the companies. It's a long road to recovery but when three jack asses go to Washington on a private plane, why should the blue collar and middle class car owner give them anymore money when they don't even want to drive.

Update 12/16/08
My fellow blogger over at The Blathering posted avery good and hillarious argument towards giving the auto industry bailout funds. Of course, it was disguised in the form of a post about crushing on Jon Stewart, however, I still admit she has a point.


Diane T said...

While I agree in general with your comments about overpaid CEOs and the incredibly stupid imagery of flying to Washington on private jets to ask for federal money, I do have to take issue with this statement: GM turned resources away from fuel efficient models and funneled them into redesigned trucks and SUVs.

When people say this, they're ignoring one simple fact: that's what the market wanted. People coming into dealerships for the past decade have been coming to buy trucks and SUVs, not efficient little cars. Trucks and SUVs have the highest profit margin, so selling them to eager buyers made up for the near-losses on compacts and hybrids. Blaming the Big 3 for focusing on the gas guzzlers is like blaming a bakery for focusing on triple chocolate cookies: sure, broccoli muffins are healthier, but people preferred the chocolate orgy.

So now everyone's having heart problems--er, gas prices have skyrocketed--and it's the car companies' fault for not predicting it? Why not blame the government for their short-sighted energy policies, which allow such fluctuations in price? Or for the uncontrolled rise in the cost of health care, which adds thousands to the cost of every car? Or for the whole credit crisis, which is drying up the liquidity that everyday people need to buy cars, or the Big 3 to invest in green tech? Because that's just as much as part of the problems facing Detroit as building "the wrong cars."

I just find it appalling that Congress hasn't held the financial companies to nearly the same standard of proof/need/change as they have the car companies.

Mongo said...

I whole heartedly agree with your comment That statement was paraphrased from a news story about where GM decided to spend their cash. Yeah, the late 90's and early 00's were all about the SUV and Soccer Moms and what not and they were smart to capitalize on that market.

If Auto Makers had soley tried to research and develop hybrids alone, they would have faced a crisis as well. But feast or famine tactics can't be the answer. Ford lost the market share with the Taurus because of the competition with foreign midsize sedans. They failed to stay competitive in a market where they were on top. Yet, look at the F-150 in terms of market share.

Granted, I can't in all honesty say that The Big Three's reluctance to balance their efforts between "what the market wants now" and "what the market will want in ten years from now" is the reason for the hardships within their companies. I cannot even say it's completely the government's fault for not encouraging green tech and doing more to stem the oil prices. But, just because no one is willing to take ownership of the problem doesn't mean they can't be part of the solution. That's why there are market analysts and someone, somewhere must have said they need to get competitive with green tech.

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