Often it's hard to understand the logic behind some of these politically motivated moves.
While I don't fully disagree with the need for a shakeup of the U.S. car makers, I'm not sure if replacing the CEO of GM (who was actually making reasonable progress) with his own hand-picked COO is much of a shakeup. It seems to me that we were building up too much heat regarding the AIG situation, and decided to take our anger out on GM.
Incidentally, I'm interested to know how badly we have now damaged Chrysler's ability to get an equitable deal done with Fiat. Can you imagine entering negotiations with Fiat while they know that your main financial backer has publicly announced that 1) your business no longer is viable, and 2) they will only offer support if you get a deal done with Fiat... Talk about having close to zero leverage.
I, for one, am very concerned that the steps we are taking to shore up the current economic problems are simply too politically motivated, and don't set up the reorganized companies in the best manner to succeed. We hire and fire executives based on public opinion vs. what is truly good for the companies and can drive their ultimate success. We give the executives of these companies the task of fixing monumental problems, but when they earn a contractual bonus we demonize them.
We need to have the courage to make the right decision on its own merits. Find the best people to run these companies, and don't expect them to be public servants. Rather, pay them market rate and more, so they are lured away from their current high-paying jobs at companies that are doing well, even in this tough environment.
The worst thing we can do is invest billions in these troubled businesses but be stingy when it comes to hiring and paying the skilled individuals who are badly needed to wisely invest taxpayer money and turn these organizations around.
Cross-posted at Reply.com
Under Wagoner's "leadership" GM has lost 80 billion dollars during the last four years. This is progress? He should have been fired years ago, and would have been if GM had a board that actually did it's job.
Is losing 80 billion dollars your idea of making reasonable progress?
:-)
IF a CEO could turn an auto maker around, he would be able to command a premium in future jobs. I have no problem paying a PERFORMING CEO $1 million a year. If they can't manage to live on that, they really can't manage a business.
And I have less of a problem with higher pay IF a CEO has a substantial portion of his families net wealth invested in said company, and NOT be options related. There needs to be a price for failure, if there is a huge reward for success.
They just have to have the right incentive to do so. Their overall survival, given the situation, is most likely what it took to make this come true. I'm not going to solve any great mysteries about why GM et al have fallen so far with these comments. But, I'd like to relate a story I heard growing up to illustrate how automakers can do better, if they want to. There was a guy, an auto nut I heard growing up, that invented a carburetor that got almost 100 miles per gallon. GM bought his patent and set the darn thing on the self, never using the new technology! Why? The reason tossed around the neighborhood was this. Using such an advanced car part would have cut into GM's profits! We always said that many cars were designed with what was called "planned obsolescent". If the story is true (I believe it, anyway), how many other things did GM et al do, like this, that led to their own present situation?
Of course, the real solution to the riddle is that everyone who told this story, ever, has failed science class. Especially the part where they talked about the thermodynamic efficiency of internal combustion engines.
"I can do better, Mom. But the teacher is unfair."
Right.
There is plenty of talent to fill the vacuum of failed CEOs.
The basic argument here is uber-weak.
Bring on the meritocracy. Good riddance to the aristocracy.
Time to bring outsourcing to the bloated Amerikkkan Korporat class.
John Fitzgerald Kennedy said something that'd be applicable here, I think...
less players in the market, more for everyone.