Sunday, December 7, 2008

Bridge to nowhere meets road to nowhere

Bridge to nowhere? The road to nowhere is in ethics...

Where the bridge goes depends on how you build it.

Just loaning money to the automakers is the dumbest thing to do.

Henry Ford once said you can have any color car you want as long as it's black. Congress has changed the color to Green. The problem is that so-called 'green' cars are not sold for a profit these days. So it's a curious mandate from Congress to a money-losing industry Congress is trying to 'help'. Thanks for nothin'.

Overall mileage standards (CAFE?) need to be imposed and kept. Congress needs to use the threat of bankruptcy to get the change that can only be had in bankruptcy. GM needs to have a number of it contracts modified- only bankruptcy can do that or negotiation if bankruptcy is really feared. To date auto execs have not had the leverage to deal with their dealers or the UAW.

Just as only a die-hard anti-commie like Nixon could 'open China' maybe only democrats can play hardball with the UAW.

The problem is less of GM and the auto companies than that of it laboring under the old industrial rules. Free trade has undermined their post-war model. Unions, once the champions of improved living standards and with vision of global union alliances have been broken by more-or-less free trade. Only the Teamsters and AFSME (municipal workers union) really have power. Truck drivers have unique monopoly power as do longshoreman. Autoworkers do not - trade undermines it and the right to work shops in the South do too. So when counterparties won't negotiate why do we blame management?

Congress needs to take a step up the learning curve and become a bit more sophisticated. The auto execs are not poster boys for the 'save my industry foundation,' that's true. But they have been laboring under constraints and the legal system and collective bargaining agreements have had them hamstrung. Those are the tables that need to be turned as much as the execs need to be lectured.

But the problem is not just in autos... If this were China we could send those 'lost' CEOs to re-education camps. But we don't do that. Nonetheless you see the actions of the execs at AIG: they got money and immediately paid off early their deferred compensation TO THEIR EXECUTIVES - making sure those monies were not at risk to any bankruptcy proceeding that might arise. Now AIG wants up to 1/2 million dollars in retention bonuses for key staff not a pool of $500Gs, $500Gs apiece for 'key staff'. Why? Where would they go? Moreover, how good are they if they lost so much money? Where is the humility among people who have failed so badly?

The road to nowhere is in ethics. These are not the kind of captains that would go down with their ship. They'd be the first in the life boats. They would not lead the charge up the hill into hostile enemy fire. I blame business schools. It's as if each one has come up with a new theory explaining why the captains of industry should paid like Kings. Why? They are only managers. When Times are bad they reveal their true selves to us... they can't take the blame because they don't see how they did anything wrong. Everybody did it, they say. So if they did what everyone else did, what were they getting the BIG BUCKS for? Playing follow the leader?

What a joke. Automakers, bankers, insurance - industries for morons not for the sophisticates as we thought. Of the three the autos guys actually have done the better job. But because its the only industry anyone in Congress can come close to understanding it is the one where the executives are being hounded in public. Sweet, eh?

Those Congressmen and Congresswomen. Those are our boys/girls. Kind of makes you proud? No? Kind of makes you want to toss your cookies.