By on October 22, 2009

Not so delightful, really. (courtesy 2.bp.blogspot.com)

OK, so, GM is a nationalized automaker. I know, I know: nationalization is for third world dictators. But there it is. Thanks to outgoing president George Bush, the feds used $50 billion from the Troubled Asset Relief Fund to bail out General Motors, in exchange for majority ownership. So no matter what W’s political successor says about his administration’s “hands off” non-management of Government Motors, he who owns the gold makes the rules. And when it comes to running a federal-funded organization, Uncle Sam plays by different rules than, say, any private enterprise extent. The bottom line is that there is no bottom line. Amtrak, the U.S. Postal Service, Medicaid—they’re all run at a tremendous, ongoing loss. Which means there’s zero sense of accountability. Which means they will never, ever be able to fully and fairly compete with privately held corporations. Why should GM by any different? Answer: it isn’t.

The truth of GM’s status was revealed the moment the then-head of the Presidential Task Force on Automobiles, Steve Rattner, fired failed GM CEO Rick Wagoner. If anyone on planet earth deserved summary dismissal, Wagoner was it. But as so often happens in life, an important principle was sacrificed on the altar of pragmatism or “political reality.” Yes, Wagoner needed to go. But the feds had no business running GM. Period. And even if you can get past that—which you shouldn’t—it’s not a good idea for elected officials and their appointed minions to decide who should be the head of a commercial enterprise. That’s like asking a serial killer to raise an an abandoned baby; no matter how good the intentions of all concerned, it’s going to end badly.

Yesterday, the aforementioned Mr. Rattner gave us a glimpse into GM prior to the automaker’s nationalization. For those of us who’d been following GM’s descent into bankruptcy, Rattner’s descriptions of executive incompetence and arrogance came as no surprise. Powerpoint mania and an elevator straight from the penthouse to the parking lot? Who knew? The real story here: the timing of Rattner’s so-called revelations. They arrived in the mainstream media the day before the staff of the federal government’s unelected “Pay Czar” let it be known that Kenneth J. Feinberg was going to cut the pay packets for GM’s top 25 earners, by some fifty percent. Connect the dots: crap managers, cut compensation. Fair enough?

Not, not at all. The problem is that the pay cuts only make sense if you accept the idea that it’s OK for the federal government to run a car company. Yes, I’m repeating myself. But it bears repeating: private enterprise and government represent fundamentally incompatible ideologies. The former requires financial accountability. The latter political. In the former case, a company must attract, retain and manage people capable of selling goods or services for more than it costs to produce them. In the latter case, politicians must convince people to vote for them. Put another way, politicians promise. Companies deliver. Or, in GM’s case, not.

Reducing executive compensation at GM will score political points, allowing Obama’s army to claim that its sticking it to the fat cats (that helped fund both his presidential campaign and the democratic party but don’t get me started). But limiting pay to $500k per suit per year (plus “shares” in a future entirely theoretical IPO) will do nothing for GM’s ability to repay its government “investment.” Or prevent further federal payments. Or forestall Chapter 7. Indeed, it will hasten the end of the end.

Limiting pay guarantees that GM will continue doing the same thing that’s brought it to this parlous state of affairs in the first place: hire from within. Make no mistake: GM “boasts” the mother of all inbred corporate cultures. The fact that it’s still led by lifer Fritz Henderson tells you all you need to know on that score. And speaking of scoring . . . Given the ongoing chaos at RenCen and the inviolable rules of supply and demand, GM can’t attract top turnaround talent from outside its shallow genetic pool unless it pays top dollar. In fact, GM would have to pay ABOVE the odds to hire anyone capable of keeping the artist formerly known as the world’s largest automaker from total self-immolation.

But that won’t happen. Can’t happen. Because commercial prudence and political acceptability are two different things. Which is why companies are not run as democracies and governments are not based on the profit motive (obviously). The wider point is also well worth making. The Pay Czar’s interference in GM’s management sets a dangerous if not entirely unexpected precedent. Although Feinberg’s pay and compensation mandates only apply to companies who’ve suckled on the federal teat, who “get what they deserve,” his rulings are a warning shot across the bow of executive suites across the country: a public proclamation of how much money is “enough” for the management class.

Thanks to America’s movement towards Bailout Nation, class warfare is breaking-out all over. In that sense, GM’s failure can’t come soon enough. Yes, I said it: I want GM to fail. I didn’t start from this perspective. I didn’t want to have this perspective. But I’m a proud American. This country was founded on the belief that government is the single greatest threat to an individual’s life, liberty and pursuit of happiness. The sooner GM’s “temporary” takeover collapses, the sooner we will realize that the Nanny State is not for us. It is, in fact, against us.

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58 Comments on “General Motors Zombie Watch 19: You Get What You Don’t Pay For...”


  • avatar
    Mr Carpenter

    Well said.

    I’m glad to see you are still here. I thought you were departing? Glad to see you have not done so.

  • avatar
    Mark MacInnis

    “Freedom” means the freedom to fail, too.

    If GM is too big for the government to let fail, then the government is de facto saying GM is too big to be free.

    To paraphrase Oliver Stone’s Jim Galloway from “JFK”….when that happens, then this country is NOT the country I was born in, and it is damned sure not the country I want to die in.

  • avatar
    jkross22

    Although Feinberg’s pay and compensation mandates only apply to companies who’ve suckled on the federal teat, who “get what they deserve,” his rulings are a warning shot across the bow of executive suites across the country: a public proclamation of how much money is “enough” for the management class.

    This warning will be ignored as it should be. Unless you take money, err, a loan from Uncle Sugar, these rules will be summarily ignored/dismissed/blown off, etc.

  • avatar
    Joshua Johnson

    I 100% concur. What most people don’t realize, is that the so-called pay czar is an unelected government bureaucrat who single-handily determines how much one is allowed to make. This not only violates every principal of supply and demand, but is also a slippery slope (yes, I know that is now very cliche) towards what one is allowed to make in other professions. There was a very good letter to the editor in the WSJ yesterday that had an excellent analogy. Link

  • avatar
    tedward

    “Amtrak, the U.S. Postal Service, Medicaid—they’re all run at a tremendous, ongoing loss.”

    And the argument made for continuing each, that the institutions provide a service essential for the future healthy growth of the country and it’s people, needs to be addressed on a case by case basis, some sink and some swim. This wholly political broadside fails to do so. It also fails to give even the slightest of nods to the context that the bailout occured in. I’ve seen you address that before (save the jobs for now argument) and you didn’t do much convincing.

    Sometimes, usually actually, government works well.

    “If GM is too big for the government to let fail, then the government is de facto saying GM is too big to be free.”

    I actually agree with this 100%, but I’m not sure if you think the solution is to keep anyone from getting that big or to use government influence to mitigate the bad side effects of such large (inevitably mismanaged) power concentrations (neither I’d suspect). The sheer number and scope of today’s wealth concentrations preclude them being managed by gentleman’s agreement or backdoor negotiations. It no longer takes a monopoly to do real damage to far too many people.

  • avatar
    Cicero

    Executives from large companies are the new kulaks. When they are driven from their positions by a wise official of the federal government, the effect will be approximately the same as when Stalin drove the kulaks from their farms. A lot of people who weren’t kulaks are going to find that suddenly there’s no food on their table.

  • avatar
    tparkit

    Executive pay (or the lack of it) likely won’t be a decisive factor in whether or not GM fails.

    Only one thing matters: whether or not we continue to buy their cars. Like Robert, I think that the faster GM fails, the better. Nothing else will stop the flow of federal dollars into the failed automakers and their labor unions. GM and Chrysler will become permanent wards of the state unless Americans force them to shut down. Electing Republicans won’t help. The RINOs will sprint to score niceness points by out-pandering the Democrats.

    We won’t lose anything by this; the notion that taxpayers would be paid back for our “investment” in GM and Chrysler was always a fraud used to sell the massive political payoff to the public.

    GM will last longer if it can get rid of albatross divisions, but the Chinese and others – except the German government – are proving too smart to buy Detroit’s mistakes. That’s why we shouldn’t be cheering for the divestitures to succeed. Only a padlock on the RenCen doors can stop Washington’s raid on the taxpayers.

  • avatar
    jet_silver

    Your conclusion is right but I think the reasoning is incomplete. Someone sets executive compensation. For a private company that someone is the owner; for a publicly traded company it’s the board of directors, who are selected by the owners (stockholders). The GM BOD has been vilified on this site for a long time and it’s never been clearer to me that the stockholders were either stupid or negligent to have not replaced it. Now that the BOD is the government, and the stockholders are the US taxpayer, the government gets to set executive compensation and that’s what they’re doing.

    Allowing the BOD to stay on even when GM was losing market share should have been part of the stockholders’ risk assessment. In a free market (of which there aren’t any) they’d have paid for their failure to know that GM management sucked. Bailouts teach investors their stupidity doesn’t matter; they’re covered. In this way the foolish are rewarded and encouraged to reproduce. Bailouts teach executives that they’re covered too. The root cause of the problem is the bailouts. Once you have that problem more are sure to follow. Here, at the very least, a few executives get a girly-slap (nothing like the KO the laid-off employees got) and I’m all for it. The money’s spent, the stockholders party on, entropy increases.

  • avatar
    geeber

    tedward: And the argument made for continuing each, that the institutions provide a service essential for the future healthy growth of the country and it’s people, needs to be addressed on a case by case basis, some sink and some swim.

    The U.S. Postal service, yes; Medicaid, maybe, but with big changes to make it more sustainable (that neither party wants to make); Amtrak, no, because it is actually viable if we allow it to only serve the routes where there is real demand for its services, as opposed to forcing it to serve less-used routes in areas that happen to be represented by influential federal legislators.

    tedward: Sometimes, usually actually, government works well.

    The question isn’t whether the government actually works well in some cases; the question is whether the government should be propping up zombie car companies.

    The “we had to intervene to prevent GM and Chrysler from taking down the supplier base and possibly the entire economy” theme worked earlier this year.

    It won’t be too convincing around December 2010.

    The government delivers my mail because a private company probably won’t do it at that frequency and at that price. Hence, the U.S. Postal Service.

    If I can’t buy a Chevy because GM goes under, I can always buy a Ford or a Toyota. If someone ONLY wants to buy GM cars – he or she gets as much sympathy as the people who only wanted to buy Studebakers got in December 1963.

  • avatar
    gslippy

    Class warfare blended with corporate welfare – a toxic mix. This will:

    – have a chilling effect on existing executives to perform, or even stay,
    – have a chilling effect on hiring their replacements, who will be less-qualified,
    – further destabilize the supply / demand / price curve in the market for such people,
    – make big corporate America look more like Asian or European corporations,
    – demonstrate the government ownership of these ‘independent’ firms,
    – become a pattern of government intervention for all sectors, including health care, defense, and publicly-funded works projects.

  • avatar
    h82w8

    Bravo, RF! Here, here!

  • avatar
    tedward

    geeber

    “It won’t be too convincing around December 2010.”

    I’d agree with that, and your point about having other car options, but the issue was a collapse in manufacturing and sales jobs. Wether or not it is politically convincing in 2010 is irrelevant, as some extended period of stewardship was obviously going to be required when the program was put together. It’s not like the government had to elbow it’s way through eager and credible DIP financiers on it’s way to GM’s reorganization, they are the only real game in town for this particular situation.

    I think that attacking the fact of government management of this firm, without having a winning argument in place against the initial application of funds (actual, not theoretical, consequences then, none of this BS moral fabric/founding fathers/preserve the mythical consequences crap) is naked political opportunism and sophistry, not meaningful critique.

    The one concrete action addressed in this article, executive pay, is a very very small potatoes issue. Where’s the exodus? And if it happens, what quality of employee is leaving? Are only insiders being hired as replacements? If so, does that have anything to do with their “only” getting 500k a year, or is it what GM has always done?

    If I saw a “wining argument” against the bailouts (or an alternative solution that would have created similarly minimal economic disruption at the time) I wouldn’t be sticking up for it. I really don’t think any company, or it’s employees, should just be protected for no reason.

  • avatar
    Quadrifoglio

    Aside from the economic and political-philosophical implications of government intervention in GM, what I found most shocking about Steve Rattner’s “expose” on the GM bailout was this nugget:

    “Everyone knew Detroit’s reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company.”
    (found at http://money.cnn.com/2009/10/21/autos/auto_bailout_rattner.fortune/index.htm )

    We’d long heard that GM’s product problem resulted from the dominance of finance guys on the 14th floor. Now we hear from a qualified outsider that the finance guys even sucked at finance.

  • avatar
    stevelovescars

    If capping pay will make it difficult for GM to hire (or promote) top talent to run the company, what was their excuse before?

  • avatar
    Bigsby

    GM became government property formally earlier this year but I would say that de facto GM became an extension of government way back in the early 1950s when it attracted the attention of the anti-trust people and then managed to get out of that.

    The meaning was clear to GM management. The rules didn’t apply to them any more. If the government gives you a pass it must be for a very good reason. That reason was that GM, as constituted, had become an issue of national power. Those who see the source of political power in GM as a matter of unions and voting patterns miss the idea, I think, that GM is a key part of the US industrial infrastructure. Evidently the politicians of the early fifties saw dismantling GM at the height of the cold war as a form of national self harm.

    The only difference that bankruptcy and bailout makes to GM is that now there is government oversight. Reality now has a way into GM’s executive halls. I suspect that the chief effect of Feinberg’s salary controls will be the mass clearing out of the upper ranks of GM management. From Henderson down these people, however they posture in public, have a tremendous and completely undeserved sense of their own self worth, a delusion that can only be maintained if the sun don’t get in much.

  • avatar
    Samuel L. Bronkowitz

    Well said.

    Dammit I’m gonna miss you, RF.

  • avatar

    tedward:

    I think that attacking the fact of government management of this firm, without having a winning argument in place against the initial application of funds (actual, not theoretical, consequences then, none of this BS moral fabric/founding fathers/preserve the mythical consequences crap) is naked political opportunism and sophistry, not meaningful critique.

    Americans died to protect the beliefs of which I speak.

    I’ve elucidated the reasons not to bailout GM several dozen times. The most obvious one: it was/is a waste of money. We could have written every UAW worker a check for $100,000 and poured billions into retraining programs and come out way ahead.

    What’s going to happen when this $50 billion’s gone? Where will we be then?

    As for “it would have been worse if we hadn’t” now THAT’S what I call sophistry.

  • avatar
    ClutchCarGo

    I’m glad to read your point about business and govt being mutually exclusive. I’ve always rolled my eyes at statements about “running govt like a business”. Businesses don’t serve markets where there is no profit to be had. Govt serves markets based on need and societal will.

    Why are you so sure that the only way for GM to get exec talent is with lavish cash? In the rarified world of execs, money becomes little more than score keeping. I expect that there are great people who could be convinced to join GM as a means of making a reputation. And, hey, who can blame the new exec if GM fails? GM was screwed up before they got there.

    Class warfare has been conducted in this nation since its inception. Sub-standard education, dangerous working conditions, crime-ridden neighborhoods are just a few of the ways that the rich quietly wage war on the poor. Somehow it only becomes class warfare when the poor seek accountability from the rich.

  • avatar
    gohorns

    Insanity: doing the same thing over and over again and expecting different results. In a nutshell this is GM. This is also company that really needs a GE type employee policy.

  • avatar
    geeber

    tedward,

    The big question in December 2010 will be whether GM is viable without government help by that time. If not, it will be time for the government to cut it loose. We aren’t doing anything for our manufacturing sector by pouring taxpayer money into an entity that is destroying wealth rather than creating it.

    Interestingly, I saw a recent Rasmussen poll that showed a majority of people want the government to get out of the auto business. Meanwhile, they oppose privatizing the U.S. Postal Service. So I think that the average Joe and Jane has a better idea of where the federal government should be involved than we think…

  • avatar
    Pch101

    But limiting pay to $500k per suit per year (plus “shares” in a future entirely theoretical IPO) will do nothing for GM’s ability to repay its government “investment.”

    What it should do is to motivate the top executives to get the government repaid, as they personally aren’t going to be able to make the big bucks until Uncle gets paid off. If there is no fire under them, they are less likely to care about whether the government gets repaid or not. We should want them to care, and if this is the way to do it, then so be it.

    Compensation tied to performance is not at all unique, of course. Investors and lenders often demand control over management to ensure that their money is repaid. The government acted very much like any red-blooded capitalist private equity firm would under similar circumstances.

    If the government decided to defy business convention and avoid the same means of self-defense, then Rattner would be seen as a naive dupe who didn’t know how to protect his client. Demanding Wagoner’s head was just common sense, and a logical precondition to funding. Handing out cash without strings attached would have been the ultimate act of crony politics.

  • avatar
    Dynamic88

    It all makes sense in an Econ 101 sort of way – until you look around and find that the real world is quite as sanitary as the economic models.

    Your argument would have more weight if I (or anyone in their right mind) thought that there were legions of super-duper execs out there ready to turn GM around if only they were willing and able to pay umpteen million PA. It’s getting harder to believe all the time.

    I can’t help but notice that exec pay was very handsome during all the years you were telling us -correctly- that GM was heading for bankruptcy. I also can’t help noticing that Chrysler has also gone into BR, and Ford teeters on the precipice. This means high levels of exec compensation have failed to achieve what you claim would be achieved, at 2 companies, and are at the borderline of failure at the 3rd.

    Of course we’ve also seen very high levels of compensation at financial institutions, and we’ve seen the results of these high payed wizards.

    You might argue that good execs need to be brought in from outside the D3, but when the man who ran HD into the ground is tapped to be head of Chrysler (even if he was just a placeholder) and LaNeve lands a job at Allstate, it makes me wonder if anyone in any of the fortune 500 recognizes talent when they see it (or don’t).

    I doubt that anyone who’s actually worth more than $500K PA would be willing to work for GM, at any price.

  • avatar
    njdave

    Two thoughts. First Tedward stated that government works often. I don’t see any evidence of this, care to offer any? The only thing I see government being good at is killing people. Second, I think that getting outside talent to reform GM is not about money, it is about ego. Most if not all of the top executives have monstrous egos that need constant reinforcement. You often see them taking over a failing company for a token salary of $1 a year, just so they can say that they turned it around. They love the admiration and attention they get for successfully doing that. The fact that none of these ego monsters has stepped forward in this this case suggests to me that they all consider it to be hopeless, that no one can turn GM around and make it profitable. Sadly, I think they are correct. I believe GM is doomed.

  • avatar
    tedward

    “Americans died to protect the beliefs of which I speak.”

    Oh c’mon, that’s a cheap shot. Plenty of American servicemen have died to protect equal protection, property rights, the glory of the flag, to simply make a paycheck and be good at what they do etc… I know several people in the armed forces and their reasons for enlisting are hardly romantic, and I’ve never even heard a credible argument that America engages in war on the basis of it’s founding principles. That includes the civil war, both world wars and all the various pissing matches with Russia.

    “As for “it would have been worse if we hadn’t” now THAT’S what I call sophistry.”

    Nope. As I recall it there were many predictions regarding the very specific side effects that would have followed a bankruptcy without avialable financing of GM during a time of extreme economic stress. The counterarguments were far more speculative, and relied entirely on promoting a purely darwinistic (ironically enough considering the political climate and alliances) understanding of the, traditionally far more complicated than that, American economy.

    “What’s going to happen when this $50 billion’s gone? Where will we be then?”

    Hopefully (and this is just my take) in a place where GM’s core divisions and assets are worth something and can actually be purchased by responsible investors, as opposed to being rashly liquidated in a temporary shitstorm. I do agree with your pessimism regarding GM as a whole’s survival, and to a degree with your discomfort with gov. involvement, but I don’t think either factor would have justified taking it on the national chin with a poorly timed collapse.

  • avatar
    ragnar danneskjold

    Mr. Farago,

    I must say it is nice to read someone who understands what is really going on!

    Bravo,
    RD

  • avatar
    tedward

    “First Tedward stated that government works often. I don’t see any evidence of this, care to offer any? The only thing I see government being good at is killing people.”

    Well, I guess you’re conceding that the military works just fine then. How about education, public services, pure tech investment, subsidized financing (from college loans to plant tooling)…the list really stretches honestly. I don’t see any evidence (looking at other developed nations) that the fruits of a first world lifestyle are even possible without a very active and largely successful government. Not that there’s nothing wrong with our system, or that all government programs are great obviously.

  • avatar
    troonbop

    “It is, in fact, against us.”

    Nailed it, Mr. Farago. GM is one more element of control of a rapidly expanding nanny state and obamao will use it to continue creating the type of country he prefers.

  • avatar
    njdave

    tedward,
    Yes the military works just fine. Education, not so much, at least compared to many other countries. It seems to me, private education is better than government education in every case I have adequate knowledge about to be able to comment on. Subsidized financing, as a parent of two college age children, I found to be an overly politicized frustrating mess. We were told we were expected to pay 1/3 of our income toward education. In New Jersey you can’t live on whats left. My children had to take out huge loans, from private lenders, to go to college. So no, college loans is not a good example. Tech investment in this country is dreadful. Public services in many areas are appalling. So overall, I don’t see evidence of a successful government. Just a successful military.

  • avatar
    ClutchCarGo

    njdave:

    You drive on a fine highway system courtesy of govt. You have running water as well. You have a coherent, if bloated utility service due to govt regulation. You have public libraries that provide excellent services. You have a reasonable chance that armed thugs will not take everything you have and get away with it. You have access to markets where sellers cannot deceive you with total impunity, and access to courts for remedy if they try. You may have a fire dept that will at least prevent your house from burning if your neighbor’s burns. Govt provides a passable if not excellent education to all comers. Govt is not the answer for everything, but it’s not the cause of all ills, either.

  • avatar
    psarhjinian

    Americans died to protect the beliefs of which I speak.

    Americans (and others) didn’t die to prevent corporate welfare, they died to ensure individual freedom. I feel this is a bit of a disingenuous tack to take: you can be part of an far more economically cooperative society and still have individual freedoms; you can conversely be economically unrestricted and subject to some awful social clampdowns. Your’s isn’t a Godwin statement–the direction is different—but it’s of the same magnitude.

    And then there’s the point that freedom really does depend upon the perspective of the person in question. Is it more “free” to legitimize gay marriage or to ban it? How about the “freedom” quotient of curbing non-governmental or corporate power and abuse?

    Bailing out two major employers of the middle class is not a bad thing to do, and can be debated. Further nationalizing them isn’t necessarily a bad thing either, even in terms of “freedom”, because it’s quite easy to ensure said freedom for individuals even while restricting a non-government entity. The problems start when, in fear of outright nationalisation, government and industry resort to private, backroom, arm’s-length (as if) arrangements to make things happen. That’s what’s at risk of happening with GM.

  • avatar
    MrUnexpected

    Uh, guys, say what you will about Amtrack and medicare/aid, but the US Postal Service is regularly profitable.

    It really is just about the only shining star in the government’s portfolio.

    NOW its losing money due to the recession, buisness mail (junk mail) is at a low, but its been profitable for years prior, and will be again.

    You can thank FedEx and UPS for providing the competition to whip the post office into shape, and every peice of junk mail for giving them the means to do so.

    GM is screwed. Ch 7 it, already.

  • avatar
    psarhjinian

    It seems to me, private education is better than government education in every case I have adequate knowledge about to be able to comment on.

    Many other western countries have public education systems that trump America’s, usually by virtue of the fact that they’re better, more obliquely and more universally funded—rather than the patchwork that is the US.

    The counterpoint, of course, is to come up with a million little microsocioeconomic reasons why America’s publicly-funded systems are because they’re public, rather than because they’re implemented a cowardly, half-assed manner out of fear of socialism.

    Signed,
    Someone who has had to deal, recently, with the byzantine mess that is retail sales tax in the United States.

  • avatar
    brapoza

    Good point clutchcargo. Kind of like reading our history books when they reference the Indian Wars of the 19th century. If the cavalry won, even though they may have killed primarily women and children, it was a battle. If the Indians won it was a massacre.

  • avatar
    NickR

    We could have written every UAW worker a check for $100,000 and poured billions into retraining programs and come out way ahead.

    Oh, but you aren’t counting the spin-offs, or is it trickle down, or the ripple effect, or whatever the hell else it’s called. You know, spending $1 that magically turns into $5 meaning that you really are getting a return on your investment? PEOPLE! If this was true we’d be rolling in money.

  • avatar
    mtypex

    “GM is screwed. Ch 7 it, already.”

    Wait your turn! Chrysler’s first.

  • avatar
    Logans_Run

    Having spend approximately 20 years as a Board of Directors level advisor on executive compensation I can identify with RF’s arguments. Short-sighted decisions to limit compensation at GM will result in a lack of talent to turn the ship around (if even possible). This Pay Czar issue will have an impact on all executive compensation, not just those at the government trough. Guaranteed that the government will attempt to expand the program and in the interim benchmarks will be set that reflect the amounts paid to the bailouts. Give me back my capitalism!

  • avatar
    dzwax

    NOW its losing money due to the recession, buisness mail (junk mail) is at a low, but its been profitable for years prior, and will be again.

    You can thank FedEx and UPS for providing the competition to whip the post office into shape, and every peice of junk mail for giving them the means to do so.

    Is it possible, then, that a public auto maker and maybe even a public health care system might provide an impetuous for their respective industries?

  • avatar
    PeteMoran

    Compensation tied to performance is not at all unique, of course.

    What a folksy business rule of yore that is. Will it be rediscovered in the USA with some leadership from the Government?

    Sometimes the old ways are the best ways.

  • avatar
    drifter

    Amtrak, the U.S. Postal Service, Medicaid—they’re all run at a tremendous, ongoing loss. Which means there’s zero sense of accountability.
    Wrong, there are certain services that a nation has to provide for the citizens regardless of profit or loss. Can’t remember when United States army returned a profit; bit it doesn’t mean there is no accountability in DoD.

    Robert Farago= Rush Limbaugh of auto-blogosphere.

  • avatar
    stevelovescars

    Compensation tied to performance is not at all unique, of course.

    Yes, but compensation with no regard to performance seems to be the rule today… at least for those on the top of these organizations.

    Bankers who caused the meltdown and got billions in federal money to stay in business still get billions of dollars in bonuses. GM executives getting multi-million dollar pay packages despite hundreds of thousands of jobs lost (in manufacturing, supplier, and dealer ranks) and one bone-headed move after another… imagine what they would have been paid if the company had made a profit selling cars anytime within the past 10 years!

    This isn’t limited to bailed-out firms, of course. My previous employer layed-off 20% of the front-line staff despite continued growth. Executives got huge bonuses… supposedly for having gone through the stress of randomly firing so many employees. The former CEO is now running for governor of California bragging about her business experience despite a common consensus that she nearly drove the company to ruin. Rich.

  • avatar
    Russycle

    In defense of Amtrak, the subsidies it receives are nothing compared to the amount Uncle Sugar spends on the Interstate highway system. Of course, it’s only a subsidy when it’s supporting something you don’t use, right?

  • avatar
    Daanii2

    In American history, has the government ever done this before? Come in like it did with Chrysler and GM to take over and bail a company out? I can’t think of anything like this.

    Banks often get bailed out, but that is with capital. Here the government put in huge money to pay operating expenses, fired management, and took control.

    Has that been done before?

  • avatar
    Robert Schwartz

    I agree with RF. This is a large nail in GMs coffin. The good news is that it will serve as a cautionary tale for any corporate honcho who needs cash to survive. Do not, under any circumstances look to Washington for your salvation.

  • avatar
    tedward

    “This Pay Czar issue will have an impact on all executive compensation, not just those at the government trough”

    well then, problem solved. No pay discrepancy, no issue.

  • avatar
    Juniper

    Logans_Run :
    Give me back my capitalism

    Is capitalism execs getting large raises while the company and the share holders lose money?
    I don’t think so.
    I read my proxy statements and that is what is happening. If you are in the closed board rooms creating this mess you are part of the problem.

  • avatar
    DearS

    I’m not so sure a GM failure will get the majority (ruling? public to stand up. The public imo is in pretty bad shapes cause of ignorance, fear, shame and judgment they place, also inherited and were taught, on themselves.

    GM’s bailout happened because the public is ignorant, ashamed, and scared. Again, still. First the public most get clear on who they are and what matters to them. Bailouts are just a symptom of the publics dis-ease, not so much a cause, imo.

  • avatar
    geeber

    Russycle: In defense of Amtrak, the subsidies it receives are nothing compared to the amount Uncle Sugar spends on the Interstate highway system. Of course, it’s only a subsidy when it’s supporting something you don’t use, right?

    The amount of money that a particular type of transportation receives in subsidies is an entirely different animal than the total amount of money spent on a particular form of transportation.

    Just because the total amount of money spent on highways is higher than that spent on Amtrak doesn’t mean that highways are more heavily subsidized than Amtrak. There are more miles of highway in this country than miles of railroad. We also have to look at how much of the total cost that users of that particular form of transportation pay.

  • avatar
    Pch101

    Just because the total amount of money spent on highways is higher than that spent on Amtrak doesn’t mean that highways are more heavily subsidized than Amtrak. There are more miles of highway in this country than miles of railroad.

    We should be honest with ourselves and admit that all transportation is subsidized. It’s not fair to single out trains when all of the alternatives are money losers.

    It’s not as if the streets in front of our home are generating a profit. Transportation is a vital component of an economy, but it doesn’t directly pay for itself, any more than a military pays for itself.

    It’s also not fair to expect the post office to be profitable, when postage rates are kept below-market in order to serve citizens who need the mail system. The US has some of the lowest postal rates on the planet, despite having a large market to serve. It could easily be profitable simply by raising rates, but Congress won’t allow for that and that would harm low-income users who need it.

  • avatar
    Mr Carpenter

    Well, Pch101 has a point in that all transportation is subsidized in America, in some way or the other.

    In fact, I’d extend that to say that the tentacles of control from Washington (via taking money and parsing it back out) have over the past 1/2 century gotten so pandemic, that it makes some of us (presumably Robert included) wonder why we bothered fighting the Nazis in WWII and Communists before and after WWII?

    Because it’s pretty well fact that we’ve simply adopted the same forms of “master-control complex” society and eschewed the free, independent, risk-taking, dare-I-say-it, manly, American way of life that was fought for, defended and for which hundreds of thousands of patriots died trying to keep alive for others.

    Sad. I guess this is the only (or, first) time that a society has watched it’s own self-destruction via the internet. The Soviets and COMECON peoples didn’t have much in the way of internet in 1989.

  • avatar
    geeber

    Pch101: We should be honest with ourselves and admit that all transportation is subsidized. It’s not fair to single out trains when all of the alternatives are money losers.

    True, but I think it’s fair to ask whether ALL subsidies are worth it. Subsidizing Amtrak service from Philadelphia to Lancaster or Harrisburg makes sense…not so sure about other, less-used routes. Just as the building the Bridge to Nowhere with federal dollars didn’t make much sense, but helping a city build or refurbish a major bridge does make sense.

    Mr Carpenter: Because it’s pretty well fact that we’ve simply adopted the same forms of “master-control complex” society and eschewed the free, independent, risk-taking, dare-I-say-it, manly, American way of life that was fought for, defended and for which hundreds of thousands of patriots died trying to keep alive for others.

    Remember that the UAW, GM and Chrysler went to Washington, D.C., hat in hand, begging for a bailout. The federal government didn’t go to Detroit and force those companies to take federal funds.

    And the U.S. Postal Service, which was one of the original targets in the editorial, was set up by Benjamin Franklin long before anyone knew what a Nazi or a Communist was…

  • avatar
    probert

    Props to ClutchCarGo and the others who reject this ill thought out nihilistic bunk.

    That it’s class warfare only when the poor ask their due is so very true. RF mentions: “nationalization is for third world dictators” and I would say one of the main characteristics of 3rd world dictatorships ( apart from support from our government) is the concentration of wealth in an oligarchical class.

    Presently over 90% of the wealth in america is controlled by 1% of the population. Welcome to the brave new world and pass the bananas.

    I don’t think the founding fathers said govt. was the enemy of the people. They saw the potential and set up a system of checks and balances. The very people who say this stuff are the people who have undermined this system.

    What they did say was that an uneducated public is the enemy of good government and this is our reality. To watch senators on medicaire rail against govt administered healthcare and people on medicaire cheer them on, is the latest example of this grotesque absurdity.

    1% controls 90% – the rest is noise.

  • avatar
    probert

    Mr Carpenter writes:” In fact, I’d extend that to say that the tentacles of control from Washington (via taking money and parsing it back out) have over the past 1/2 century gotten so pandemic, that it makes some of us (presumably Robert included) wonder why we bothered fighting the Nazis in WWII and Communists before and after WWII?”

    And i’d reply: They didn’t fight for unbridled greed and mob rule.

    Maybe this will remind you of what was fought for:

  • avatar
    tedward

    “In fact, I’d extend that to say that the tentacles of control from Washington (via taking money and parsing it back out) have over the past 1/2 century gotten so pandemic, that it makes some of us (presumably Robert included) wonder why we bothered fighting the Nazis in WWII and Communists before and after WWII?”

    Sorry, but that is wrong, and so is the counter-response that it had anything to do with preserving individual liberties (as touching as that video is). All of the conflicts mentioned so far have been instigated on a political level by very real, very material threats to America’s likely safety and prosperity (hostile empires with potential military supremacy no less). Accepting the public selling points of these conflicts as if they were root causes of the actual political motivations is a mistake. If you think that any individual soldier’s reasons tell you why “American’s died” then there are too many right answers to make any one notably significant.

  • avatar
    Mr Carpenter

    Yes, probert, maybe 1% does control 90% of the wealth.

    Three points.

    One. I have never been hired by a street person or day-laborer.

    Two. I’m going to presume to assume that you’d like your government to take away the money from the wealthy and redistribute, by proxy.

    The question following point two, is just who decides who loses what and who decides who gains what?

    Three. Try asking a Russian about 70 years of post-revolution rule “how’d that work out for ya?”

    Post-war Germany had a massive black-market problem. In a matter of a couple of years, a few had gotten rich by means of black-marketeering.

    It was announced on one day (I think it was in 1949) that the old Germany money was no longer valid currency, and that all Germans were to go to their banks and pick up the new currency.

    Everyone would be provided the same amount.

    Suddenly the black-marketeers no longer were rich.

    Question to ponder: how long did it take before there was a middle class and wealthy people in Germany, again?

    (Answer: only a matter of months)

    If life were fair, we’d all be living in a midway.

  • avatar
    psarhjinian

    In fact, I’d extend that to say that the tentacles of control from Washington (via taking money and parsing it back out) have over the past 1/2 century gotten so pandemic, that it makes some of us (presumably Robert included) wonder why we bothered fighting the Nazis in WWII and Communists before and after WWII?

    If sarcasm is the lowest form of wit, hyperbole is the lowest form of argument.

    Do you really think that America, or any western nation, as it is now, is anything like Nazi Germany or Stalinist Russia? Are we executing millions of people and making soap with their corpses? Are we invading sovereign nations (or at least doing so with more regularity than when we were a nation of Real Men)? Do we have recruiting camps for the young where they salute our fearless leader?

    Come on, pull the other one, it’s got bells on.

    Because it’s pretty well fact that we’ve simply adopted the same forms of “master-control complex” society and eschewed the free, independent, risk-taking, dare-I-say-it, manly, American way of life that was fought for, defended and for which hundreds of thousands of patriots died trying to keep alive for others.

    Back in the day, when men were real men and women stayed in the kitchen, you mean? When we dutifully watched movie reels and read newspapers produced by rich media barons who had no bias, oh no sir, none at all, about how naughty the Reds were and how they were attacking every facet of American life, and how they couldn’t be allowed to get so much as a toehold by demanding un-American things like a social safety net or a tax code that would be remotely equitable.

    News flash: you’ve been manipulated, you just don’t realize it.

  • avatar
    KingShango

    Sorry but in this case the government has every right to control the pay of GM executives, it ownes the company. Period. The government isn’t setting any “dangerous” precedents. Lets not forget that GM wanted Washington’s help. I’d like to see the Fed’s try and control Exxon’s salaries. Won’t ever happen.
    Also lets not forget that GM wasn’t exactly hiring top tier talent for the past 20ish years without any salary caps. The idea that salary caps will create executive flight is also insulting. Where are all those “highly qualified” exec’s going to run to? Ford? Nope. Toyota? Nope. The auto industry isn’t exactly booming right now.

  • avatar
    bigbadbill

    Jeez, you guys are way over my head. I don’t know a thing about what’s happening in the corporate halls of GM. You guys sure know a lot. Well, I do know some guy, name of Rick got canned and another guy with a moustache took over. And another older guy who flies Czech (or maybe Slovak) fighter jets seems to be some sort of hotshot there. I think his name is Bob…that’s it…Bob Goodwrench… or something like that. We sure do comment a lot about GM. I’d sure love to hear some corporate intrigue stories that go on at Toyota, Honda, etc. or do they keep a much lower profile. And their names are harder to spell. One thing I do know; they must be laughing out loud at the Americans.

  • avatar
    plugot

    GM’s fall has been building for literally decades. If you’re interested in seeing behind the curtain, pick up a copy of “All Corvettes Are Red” by James Schefter. What started out as a book about the creation of the C5 Corvette became a look inside a bloated, arrogant, and incredibly incompetent entity. Unfortunately, the disaster that was/is GM is mirrored in so many of the Fortune 500 corporations that it’s become the norm.

    And as long as we only have 2 major political parties who suck back corporate monies faster than a Hummer at a gas tank, there will be no reason to expect the situation to change.
    Why should it? I mean I’d love to have it both ways too – when I make money I get to keep it all, and when I screw up so badly that I almost tank the global financial system Uncle Sam bails me out.
    Anyone really think that’s going to change?


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