Mitt Romney, from his “Let them eat cake” editorial about the big three:
The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.
ABC gets in on the act:
The CEOs of the big three automakers flew to the nation’s capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.
Look, I understand the symbolism of it all, and I do not disagree that there should be extreme make-overs at GM, Ford, and Chrysler, but pushing this sort of nonsense is akin to John McCain pretending during the campaign that with his strong leadership towards ending earmarks, we can balance the budget in no time. This is symbolism over substance.
The larger picture regarding Mitt’s editorial is that it seems to miss what many of you have pointed out in previous threads, which is that bankruptcy for the Big Three would be great in normal economic times, but right now would be disastrous, as they would not be able to find the financing to restructure given the credit crisis. As an idiot, I can not speak to whether this is true or not, but it sure seems to make sense.
Also, say goodbye to Michigan and Ohio in your 2012 run, Mitt.
The Grand Panjandrum
My inner Gremlin is laughing his ass off …
gopher2b
I don’t think this is symbolism over substance (I only read your excerpt). Its a symptom of the larger problem. Think about it – they are begging BEGGING for money and they fly a jet that costs the company $75k round trip (at least) for a 90 minutes flight. Not only does it not occur to them that the symbolism is bad. Apparently, the fact that its a bad business decision is lost on them too. Shocking. Shockingly stupid.
I’m not convinced they couldn’t get DIP financing. Remember, a few weeks ago they were arguing that they couldn’t go into bankruptcy because no one would buy cars from a bankrupt manufacturer. That didn’t work so they’re going to try this now.
If there is a bailout, it should be one that facilitates Chapter 11, not circumvents it. A federal bankruptcy judge and bankruptcy lawyers should reorganize these companies with the help of their creditors. ….no the Labor Department or some other Czar that will undoubtedly favor special interests over the creditors’ rights.
Comrade Stuck
While all of the above is basically true, it is wholly dishonest rhetoric coming from wingnuts. It’s more true that it is wingnut code talk for let’s fuck the Unions.
Zifnab
Yes, if there’s one thing I’ve learned, its that after your company – formally worth tens of billions of dollars – loses tens of billions of dollars in a matter of months, the first thing you do is run out and sell the corporate plane. Then, maybe downsize the dining room. And perhaps trim back the eight digit salaries to high seven digit salaries. Oh, and start union busting.
Because, let’s get real. This is what the end game for the GOP is about. Union busting on a national level. The auto industry is the biggest industry in the US and it is the bastion of the biggest union in the US. When it rises, it rises in the face of unions. When it falls, it falls entirely because of unions.
Once the GOP is done lambasting the Big 3 for owning corporate jets and limousines, it’ll demand cutting the real "wasteful spending" in the company – health care and salaries.
Comrade Ed Drone
Somone else has pointed out that another loss would be the loss of the last large unionized factories. And thus, a further tipping of the scales toward the companies and corporations. One more balance element lost, and we can count on wages stagnating even when company fortunes turn around.
No wonder the Republicans are so gung-ho on making the Big Three ‘take their medicine.’ Who needs the votes of state populations you’re planning to pauperize, anyway? Watch for campaigns to ‘end voting fraud’ (restrict the franchise) in Michigan, Wisconsin, and Ohio. Eliminate enough low-wage voters and you might not even lose the states, you know?
Ed
donovong
If the asshole senator Shelby from Alabama is against it, I am definitely all for it.
But, in addition, Paul Krugman told us Sunday on the Georgy Show exactly that – letting them go into bankruptcy now would be stoopid in the extreme. I trust a Nobel scholar in economics (which I ain’t) to know whether it would be a big problem to let them go belly-up right now. So, we should toss them a lifeline with one hell of alot of conditions (caving to CAFE and emissions standards, etc.) and save their asses.
Rihilism
Dear Sir –
I have occassion to read your blog from time to time and am always pleasantly suprised when I see that you have come to your senses. I mean this in the kindest way possible.
Sincerely,
Mrs. Gladis Veemermidlehotzenhammerscmhidt
Semanticleo
We’re all idiots, John, including the brain trust we depend on to figure all this out.
Just as Lieberman kept his chairmanship because of the ‘Brotherhood’ of the Senate, so too, the overwhelming desire for comity and bi-partisanship will be to allow the Big Three to flounder to appease the ‘conservative’ within it.
Then they will fiddle as the Midwest burns…………………..
Ben Richards
The government could backstop a DIP financing. Like it or not, a lot of what Romney says is true. He even says the current debt and equity holders are out of luck, which I agree with completely – the equity is mostly gone anyway and the bonds are trading well below par.
A managed bankruptcy is the way to go here. You can preserve jobs and re-configure these companies to be more competitive. If GM is going be out of cash in two months, how is giving them 10-15 billion now going to do anything except push the timetable back a few months? let’s give them a lifeline, but under a the umbrella of a bankruptcy.
The airlines have done this already.
Lee
Probably the best solution (which they probably won’t do) would be to bail them out but require them to file Chapt 11. This allows them to renegotiate all their contracts.
Hopefully with this they can reduce their healthcare costs as well as the cost of keeping their workers on the bench and at close to full pay.
J.
Excuse me, sir, was that a reference to THE DIVISION-LEADING NEW YORK JETS? Just checking… (And am personally hoping they wear their New York Titans uniforms when they play Tennessee this weekend, though they probably won’t.)
4tehlulz
Brett Favre destroyed GM.
Svensker
@J.:
You beat me to it.
John, STOP BLAMING THE JETS!!! Everyone knows that the Patsies and Bullycheat are really at fault for everything.
The Moar You Know
Chrysler is the Terri Schiavo of the auto industry – they are dead no matter what anyone does. OTOH, Ford is in pretty good shape – they have a shitload of cash on hand and can weather the storm for quite a while. They could use some money to retool but it is probably not essential for their survival.
So the real issue here is GM. And I think if we can give 150 billion to AIG, we can give a fraction of that to GM to give America’s largest non-governmental employer a chance to stay alive.
Bob
Notice Mitt said the big three need to protect the dealers, but screw the unions.
Considering that labor realized long ago what they were up against and came up with labor agreements that could save the companies, (starting in 2010) labor isn’t the biggest problem.
The greatest advantage in bankruptcy would be that the big three could kick some of the dealers to the curb. Auto dealers have lobbyied and received strong statutory protections in most states. Getting rid of dealers is really expensive for the auto companies. When GM killed of Oldsmobile it cost them a Billion dollars to pay dealers to go away.
Tim H.
Who ever said the GOP is conservative? It’s pretty radical to plan on a country that manufactures exactly none of the necessities it requires, but buys them from a better performing nation. Historically, weren’t those guys known as "colonies" or "client states"?
Dave
Another problem with a bankruptcy (beyond the obvious credit issues) is the impact on sales. Who will buy a car from a company that may not be around in 3-6 months? That will further kill sales, which will in turn impact employees, parts suppliers, dealers and all the businesses that depend on the expenditures of workers.
That’s the difference between GM and Delta going bankrupt; no one thinks the 747 will run out of parts in six months.
Isn’t there any way for these guys to re-negotiate their contracts without the stigma of a bankruptcy?
Bob
@ Ben Richards:
Becuase in 2010, their new labor agreements kick in, which will likely make them profitable. They can also use a loan to fund the VEBA and get retiree health care off their back.
jenniebee
@gopher2b: What gopher said. And also what Zif said.
Said it before and I’ll say it again: you cannot convince me that the reason the Big Three are flailing while the German auto industry is doing fine is because Detroit is more hampered by unions than the Germans are. This idea that what’s keeping employees from getting richer is that they’re not racing each other to the bottom of the salary barrel is the most ridiculous, on-its-face stupid idea contradicted by every slum and immigrant population in US history.
John, it isn’t symbolism, and the problem isn’t that they haven’t sold the plane already. Even before they sell it, there’s a high cost to actually operating the plane. They’ll shut down factories, lay off workers, demand concessions from the unions, and hold taxpayers over a barrel, but executive perks are sacrosanct.
Now cue everyone who was outraged that Joe the Plumber’scrack might have (hypothetically) had to pay 3% more taxes on income over $250K pa to be outraged, outraged at these fat cats for using US Auto as a goody bag instead of making it long-term competitive.
Lee
Not many people are buying them now, so it makes little difference.
One big difference between here and Germany is probably healthcare cost. For both retirees and current employees.
Brian J
Wasn’t Mitt promising Michigan voters in the primary that the jobs of the past would come back under his presidency?
Well anyway, I’m not sure how much limiting executive compensation in the auto industry would really save. A quick Google search reveals Rick Wagoner’s pay to be about $8.5 million for the year, which is an increase, even though the company has been losing money for a few years. It’s certainly an incredible amount of money to most people, but his salary isn’t going to make a difference one way or another on the company’s bottom line. Public relations views aside, one of the few reasons, if not the only reasons, to ask him or others like him to give up some of his salary is sort of a bargaining chip for asking for government support. It’s something to the effect of, if he wants it, he shouldn’t have a problem putting his money on the line as a way of saving the company.
Brian J
I’ve heard something to this effect repeated on several blog posts. How can I know that this is true? Is this projection based on the sales of a certain number of cars, or is it that if the new labor agreements kicked in now or very soon, they’d be in much better shape?
Face
Isn’t this just an effort to eventually blame the Dems for GM’s demise, thus using pain and hardship of the American laborers to try to win back Ohio and Michigan from the Dems?
Cynical I am, yes.
abiodun
Mitt Romney advocates "The Shock Doctrine". He did not tell us what happened to AMC that was run by his father, though.
alhutch
Mitt is an idiot to act as if each of the Big 3 faces the same problems (plus AMC wasn’t exactly a shining example of success after his father’s reign).
As mentioned above, Ford is probably the healthiest. New CEO Mulally has been there less than 2 years but has already shed Jaguar, Aston Martin & Land Rover. They also sold 2/3 of their 30% share in Mazda to raise even more cash. He has stated recognition of the fundamental shift in consumer preference toward smaller cars (i.e. it’s not a fad to him). Yes, they still make a ton of F-150s, but at least are bringing the new Fiesta and Focus in 1-2 years.
@The Moar You Know: has it right. Chrysler is dead and doesn’t seem to know it. Morbund product, no Euro division to draw better product from and previously the weakest of the 3 after the "unmerger" from Damlier. The Pentastar was already on life support, this will kill it.
GM can be saved. It needs to restructure and maybe kick Lutz to the curb. All horsepower and no future vision isn’t was they need right now or going forward. Fast track the Volt and get some diesels here ASAP (in cars & trucks).
RS
I’m glad to see Romney an advocate for "accepting sanity in salary and perks" for executives. Perhaps Mitt can lead a wider national dialogue on narrowing the disparity between executive and worker compensation in the US.
Napoleon
@Brian J:
I thought that the 2010 changes have already been agreed to. The way I understand it is that basically the auto companies off load all retiree heath cost (maybe all retirement cost) for one big payment to the union which the union will use to set up their own plan. I assume it is such a major shift in how things are done that they simply could not shake hands and have the deal kick in on day one, but that the union was given a couple of years to set up their own program before the company program was terminated.
Bob
Brian J and Napoleon-
The creation of a VEBA, which (when funded) will offload the retiree health care obligations. The other part is that in 2010 (and somewhat now) the two-teir wage structure kicks in allowing less expensive permanent, new employees to replace more expensive emplyees, who are currently being bought out.
BombIranForChrist
I don’t think the jets are symbolic. I think they are emblematic. Emblematic of an old, calcified corporate structure that doesn’t know its ass from its elbows.
I worked at a large corporation where the executives ate their meals with the rest of the riff raff, and I don’t think it was a symbolic move. When the employees thought the executives unleashed some idiotic new plan / scheme, the executives could detect the animosity in the cafeteria. The cafeteria was a barometer of people’s real attitudes towards management. Whether management likes it or not, the rank and file people know just as much about the product as the executives, and they know shit when they see it, and this attitude permeates the public spaces at the company.
So yeah, if these clowns are serious, they should start flying on normal planes and eating with their employees. Remaining cooped up in their gold towers is a big part of the problem. Only someone this hermetically sealed from reality could think that making hybrid SUVs with only terrible gas mileage instead of horrible gas mileage is a good idea.
Church Lady
If the new labor contracts, which GM is counting on the help restore them to profitability, don’t kick in until 2010, doesn’t that mean that, even with a bailout, 2009 is going to be another year of losing money hand over fist? If it’s in everyone’s interest, especially the UAW’s, to keep GM going, shouldn’t the UAW be willing to have the new agreements kick in sooner? If I had to make a choice between no job or a job with smaller benefits, I know what I would choose.
D-Chance.
This is symbolism over substance.
Ditto,
RushCole, ditto!Tonybrown74
Can I just state for the record that I cannot stand a grown-ass man using the phrase, "my dad," when referring to his father in the third person?
For FSM’s sake, the man is pushing 60 and he actually wrote/said, "my dad did …"
And we’re supposed to take anything he says seriously?
Blurm
NO WAY! Blame tha SHARKS!
When you’re a Jet you’re a Jet all the way from your fist cigarette to your last dying day!
Birth to Earth- Sperm to Worm Muthafuggahs!
Brian J
@ Napoleon, Bob, and Church Lady:
This may be a particularly bad way of looking at things, but supposedly, the European car makers are looking or will be looking for some type of government support, which leads me to believe that it’s the industry wide conditions that are really bringing the Big Three down. Or rather, it’s not that the other parts of their operations are so great, but that the same sort of problems are making all car makers look for help. If this is the case, and if they really are making strides or have made strides in reforming their operations as far as labor costs go, then perhaps some sort of support is justified. The thing is, is this sort of conclusion really that hard to reach? We’re talking about making and selling cars, not curing cancer. The information being dealt with in this sort of analysis is something, I would think, that people are pretty familiar at dealing with.
Also, if it’s really the labor side that’s weighing them down, despite the overall problems in the economy, can’t any sort of government support deal with that directly, whether it’s helping them speed that process up or taking those issues off their books immediately?
pseudonymous in nc
What the asshole senator Shelby from Alabama is too dumb to realise is this: if GM is broken up and sold off at firesale prices, it comes back to bite him in the ass.
He thinks that it means yet more car assembly plants for noble non-union Southrons. What it probably means is that SIAC buys all that’s worth buying, starts importing foreign-made Chevy Celtas and Cruzes, potentially as loss-leaders, and puts the squeeze on Honda and Toyota.
Clearly the top management of GM need to be kicked the fuck out. (Less so Ford, where Mulally is doing the right long-term things, even though the optics of the private jet were dumb.) But in the mid-term, the feds and states need to start thinking about diesel, and cut some red tape to allow faster approval of cars that don’t piggyback on existing plaforms for emissions/safety cert.
The big issue facing GM is that its North American operations have long been out of step with the global business. People living in Foreign don’t think of their Opels or Holdens as ‘American cars’, with good reason: they’re cars that Americans never see on the road.
tavella
Hell, we could bail out GM with just the money we are giving to Wall Street to fund their bonuses this year. The mentality that we have to make sure that they get their billions in bonuses or the poor dears will feel too discouraged to create fictional money, vs. but it would be un-capitalist to save industrial base and all the millions of jobs not to mention engineering and machine tools skills disgusts me.
pseudonymous in nc
It’s weird, isn’t it, how ‘the economy’ is one thing in the American political/media discourse, and ‘labor’ is another? They love their blue-collar stereotypes, but treating blue-collar work as part of the economy is somehow icky, perhaps because there’s a distinct lack of CNBC-style suit-and-glasses guys shouting at one another and ‘money honeys’ doing the coverage.
les
From NPR’s money/economy show, whateverthefuckit’scalled (I blame the drugs):
GM and Toyota, roughly equal U.S. market share; GM 7,000 dealerships, Toyota 1,500 dealerships. Fund ’em through bankruptcy and leave the fucking labor contracts alone.
Bill H
The endless drumbeat of being unable to find financing in bankruptcy, so give them financing to keep them out of bankruptcy. Does anyone ever really examine that arguement? I mean really look at it. Does anyone actually look at the fact that the word "financing" is used twice there? They can’t find what we are proposing to give them. So let them go into bankruptcy and then provide them with the financing in bankruptcy.