GM’s Slough Of Despond

I hate to sound like some kind of nutcase… WCapitalist Pigho am I kidding? That doesn’t bother me at all. Nevertheless, I hate to sound like some kind of plutocrat-resenting, knee-jerk nutcase, but I risk it with this post. That is, it’s a risk if there is anyone who thinks this is reasonable:

General Motors, which has borrowed $13.4 billion from the federal government and is seeking billions more, acknowledged in its annual report on Thursday that its survival was in ‘substantial doubt.’ …

Also, the company said that the compensation of its chairman and chief executive, Rick Wagoner, was reduced to $5.5 million in 2008, 61 percent less than he earned the previous year. Mr. Wagoner has agreed to work for $1 this year.

G.M.’s president and chief operating officer, Frederick A. Henderson, received compensation worth $1.7 million in 2008, a 76 percent reduction. Mr. Henderson agreed to cut his base salary by 30 percent in 2009, to $1.3 million.”

Yes, that’s right, at the end of the year in which GM lost $30 BILLION, it’s chief executive took a large pay cut, making just a weensie $5.5 million. This year, in which it remains to be seen how many billions of taxpayer dollars the company can absorb, the chief operator will only get $1.3 million. Gee, Fred, are you gonna be alright? Should we pass that hat for that poor bastard?

It doesn’t take too many peasants to figure out that a) the guys who ran this baby into the ground are still in charge, and b) they’re not hurting the way they should be. The next time someone blames the unions without so much as a mention of executive pay – current and for the past decade – I‘m going to blow a gasket. Forget the cars and trucks, start selling snake oil, boys, ‘cuz you sure done sold some to your board. Whoever agreed to give Rick Wagoner a dollar for this year ought to reconsider. In the meantime, GM should declare bankruptcy and restructure, rather than be spared that fate. Otherwise, we’ll just see a lot more of the same, and, frankly, I don’t think we can afford it.

G.M. has until the end of this month to reach deals with the U.A.W. and its bondholders and to show President Obama’s auto industry task force that it is making progress on the restructuring plan that it filed with the Treasury Department in February. If it misses the deadline, G.M. would be unlikely to receive the additional loans it says are needed, and the government could demand immediate repayment of G.M.’s outstanding loans.

G.M. said in Thursday’s filing that it had no way to repay the loans right now and could soon become insolvent without at least $9.1 billion more aid. It wants a total of $30 billion.”

There’s a deal with teeth, huh? They follow the plan or they have to repay the money we’ve already forked over. They say there’s no way to repay it and they need more to follow the plan. That pit is deeper and darker than the well of populist anger, I don’t think we need plumb its depths any longer.


  1. Adam Linker

    March 5, 2009 at 2:40 pm

    UNC President Erskine Bowles sits on the GM board and apparently supported giving millions to failing executives.

    Also, interestingly, GM CEO Rick Wagoner is on Duke University’s Board of Trustees.


  2. IBXer

    March 5, 2009 at 2:44 pm

    Businesses cannot survive if they serve their own interests. Business can only survive if they do what other people want them to do.

    For example, if I enjoy making bobbles, but no one wants to buy my bobbles, I will go out of business. If people prefer widgets, and I change my business model to make widgets, then I have a much better chance of success.

    Business must serve the interest of others in order to thrive. Unions, on the other hand, exist for the sole purpose of serving their own self interest.

    That is why the two can’t meld successfully. The self interest of the union will undermine the need to serve the interest of the customer.

  3. Adam Searing

    March 5, 2009 at 3:05 pm

    Sorry, I’m not buying your bobbles.

  4. Rob Schofield

    March 5, 2009 at 3:21 pm

    One of our readers sent me an email suggesting a new title for Wagoner, Henderson and their ilk — CLO (Chief Looting Officer).

  5. gregflynn

    March 5, 2009 at 4:50 pm

    If I enjoy making bobbles, but no one wants to buy my bobbles, I might go out of business. If people prefer widgets, and I destroy the market for widgets, then I have a much better chance of success.

    I can lobby and pay off legislators for burdens on widgets and widget users, for bobble subsidies, reduced oversight of bobble production, mandatory bobble purchases, proprietary specs that can only be met by bobbles. I can execute predatory pricing, hostile takeovers and dissolution of widget companies and suppliers. I can buy up or dry up the supply of raw materials for widgets. I can buy up patents for widget components and sit on them. I can spread rumors about widget safety and contamination. I can place damaged widgets on the shelves. I can pay a think tank to denigrate widgets and elevate bobbles or call for bobble vouchers. I can set up a fake grassroots campaign for bobbles over widgets. I can take control of distribution and/or sales of both widgets and bobbles. I can pay foreign officials to arrest widget distributors in their countries. I can cut the pay of my employees, cut benefits, increase their hours. I can fire injured workers. I can offshore bobble production. I can sell defective bobbles with impunity when I have a monopoly. I can then sell the bobble company for billions before it crashes. Then I can resurrect the widget as a competitor using the same techniques to destroy the bobble market. There are so many things I can do that have nothing to do with serving the interest of the customer.

  6. AdamL

    March 5, 2009 at 5:15 pm

    Wow Greg, maybe you should be a bobble consultant. You have some great ideas here.

  7. IBXer

    March 6, 2009 at 9:31 am

    Greg, you just explained perfectly why we do not have a free market and have not had a free market for decades. As long as the government enough power than bobble makers can pay legislators and government officials off to ensure widgets stay out of the market, the interests of the consumer are not being served.

  8. gregflynn

    March 6, 2009 at 10:24 am

    Corruption exists with or without government. A government that bends to the will of bobble makers is not powerful. Without a governing system (with integrity) the behaviors described become amplified.

  9. dmin

    March 6, 2009 at 4:13 pm

    I thought the purpose of public companies to serve the interests of their stockholders–the best interests of their employes and customers are secondary.

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