Ah, how humble we become when the end is imminent. Since the beginning of the financial crisis, CEOs and other executives have continued to rape their own companies with stock options, corporate luxuries, and big bonuses. No matter that the stock options may not be worth as much as during the housing bubble heyday--$3 million of stock options is still a lot of money. And no matter that bonuses may not have been large either--20% instead of 40% of your executive pay is still a lot of money. But the public does not get upset quite as much about bonuses and stock options. They still remain a subtle form of income to the American public. It is the company luxuries about which that the lay public are outraged, at least for a little while. AIG executives going on an indulgent spa weekend after receiving your hard earned bailout money? Horrible. Yet the backlash was not even that severe. What actually happened, anyways? There was a good three, maybe four days of news coverage about it, and then nothing. There was no follow up in the news because there was no follow up on which to follow up. The executives at AIG got at worst a tongue lashing. How about that to expose the impotency of Congress--the very people who decided to put the next three generations of Americans into debt cannot even control the people begging for money. We will discuss that in the next article.
Now we have the Big Three automakers--GM, Chrysler, and Ford, begging for money to save the American economy from the crisis that would ensue from the collapse of the Big Three. The problem is, however, that the Bug Three have made no significant changes to protect themselves yet. They still spend ridiculous amounts of money on lobbyists and ridiculous wine and dine parties for politicians and influencers. The executives still collect extravagant salaries and stock options without fear of unemployment. You have to wonder how dire their situation is and how badly they really need money. So let's see...
The big three executives flew out to Washington DC on a private jet, which costs about $50,000 per flight. Their explanation was that they had several meetings to attend that day necessitating the cost of a private jet. I'd like to know what was stocked and available to drink on that jet, regardless of whether they actually drank it. But their explanation tells us quite a bit. The first is that they do not know how to manage their businesses. The financial crunch has been presents for a while, and they are only now realizing they need assistance? Three major auto companies, all lacking the foresight into their future economic position? That's bad management, plain and simple. No wonder the auto workers' pensions had problems before the market bust--it was mismanaged as well. How does giving lots of money to those same idiots solve the problem? It does not, of course. They then came back to Congress after the inital tongue lashing, but this time they came in brand new hybrid vehicles. Did they really drive all the way from Detroit to Washington DC in a car? Where did they stay? The Four Seasons or a Red Roof Inn? Where did they eat? The Palm or Red Robin? Most people will say that if you are begging for money, you do not waste money on an executive suite and you do not eat steak. You sleep on a cot and eat happy meals. I doubt Rick Wagoner had a difficult road trip. And given the supposed urgency of the needed bailout, why would you spend two days on the road in a hybrid vehicle? It's far more likely that they flew (again) into Washington and got picked up in their new hybrid vehicles. So now with even more desperation, the Big Three CEOs offer to take a salary of $1/yr to persuade Congress to give them the money. There is, of course, no mention of bonuses (which can still be given despite poor bottom lines, mind you) or stock options or executive perks. Very convenient. They also concede to Congressional oversight, knowing that it will be similar to AIG's oversight, which is the same as having a myopic grandmother proofreading the classifieds for typos. To the credit of some Congressional members, they said outright that they would work to deny any bailout of the Big Three. Unfortunately, very few if any members of Congress are this serious and not willing to sell out for pork or kickbacks.
Now there are massive layoffs occurring, and the rumors say that at least one of the Big Three will fail. This is apparently good reason for Congress to consider putting our children and grandchildren into another $15 billion in debt. The good reason being fear. Any rational person would see that the Big Three are based on failed business models. The fact that they are large companies does not in any way mean that they should not fail. If they fail it will be because their business strategies were poor, not because they were unlucky. The fact that they have gotten this big removes luck from the equation. There are thousands of large companies out there, and few are failing because they have a good business model, not because they were lucky. A mom and pop joint surviving this crisis is lucky. And international company failing in this crisis is just poorly managed. Politicians are fools to allow the fear of massive layouts nudge them into a wasteful bailout plan. What they should do is look at how much the executives (not just the CEOs) made from the auto companies over the last decade--during the entire time that the companies should have been better managed, luxuries curtailed, and bonuses made reasonable and reinvested, and MAKE THEM GIVE IT BACK. I would like the CEOs begging for money to explain why they should get $15 billion of taxpayers' money when the money the companies should still have on their balance sheet is the pockets, homes, cars, and boats of the executives.
We can also discuss the United Auto Workers Union (UAW) as well. Another mismanaged trust fund from which a failing economic student could learn. Now while health care costs are largely responsible for the funds shortfall, we must remember that it was agreed recently that the UAW will take over health care costs from GM in 2010. But the pension aspect still suffers from the same mistake of every failing pension fund. At one point it incorrectly began using the contribution of workers today to pay for the pension of the retired, instead of using money today's retirees contributed while they were working. A pension, after all, is really a group retirement plan. You must save money during your working years and let it grow so you can live off of it when you retire. With a pension you essentially pool the contributions of your coworkers. This is what has happened to Social Security. Apparently few pension fund managers realized the idiocy of the idea.
So I say let the Big Three fail. Perhaps a new Big Three will rise from the ashes and be better managed. And if the CEOs are truly serving the needs of the company and its many workers, they should sell their mansions, cars, and island houses, sell their stock at current value, put the money back into the company, and let someone else manage the company. It cannot turn out any worse than it is now.