Why are we not holding Wall Street hostage like we are doing the automakers? Wall Street gets a blank check with NO CONCESSIONS OR OVERSIGHT.
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Detroit's Delusion
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Yet while GM and Chrysler appear to exhibit many of the symptoms of bankrupt companies—miniscule stock values, distressed bonds, explicit statements that creditors won't be paid in full, and an admission that they're running out of cash—many of those in and around the Big Three act as if the industry has suffered mere flesh wounds. The CEOs of Ford and GM have said they'd be willing to accept $1 salaries in exchange for the bailout (Chrysler's CEO Robert Nardelli, who made a pile while running Home Depot, is already a dollar-a-year man). I'm curious as to what they think their salaries might be six months hence should the companies be forced into Chapter 11. And it's tough to imagine any scenario whereby a bankrupt GM, under the control of its creditors, would retain CEO Rick Wagoner.
The United Auto Workers union is also slowly coming to grips with the fact that its historic role as the guarantor of high wages, pensions and benefits, is likely a thing of the past. UAW President Ron Gettelfinger said Wednesday the union might be open to renegotiating contracts and forgoing contributions to its health-care trust and, as The Associated Press reported, "that the union will suspend the jobs bank, in which laid-off workers are paid up to 95 percent of their salaries while not working, but he did not give specifics or a timetable of when the program will end." Um, how about yesterday? It's one thing for a union to ask management to pay for no-work jobs. It's quite another for a union to ask taxpayers to pay for them. Asking for federal help without loudly killing the jobs bank immediately is about as tone-deaf as asking for a bailout after having alit from a corporate jet.
The sad fact is that the U.S. auto industry has essentially failed. Even if car sales come roaring back from their current anemic pace next year, there's no guarantee the Big Three will return to health, that they'll be able to stay current on debt payments, and be able to raise capital from tough-minded investors. The executives and union leaders speak as if the bailout money is simply needed to tide them over until the sun comes back out. Exuding and instilling such confidence is a big part of their job. But increasingly it seems that the federal funding they're requesting is necessary to help manage failure, not to stave it off.
© 2008
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