The Revenge Of The Son Of Jet-Gate

The personal transportation choices of auto executives has always been an easy point of reference for members of the mainstream media looking for an easy story. From Alan Mulally’s Lexus to Akio Toyoda’s Davos Audi getaway, auto execs’ use of non-company vehicles is always good for a quick “gotcha” headline. But no story in this rich oeuvre has had quite the impact of Jet-Gate, the name given to the mini-scandal that erupted when the executives of Ford, Chrysler and GM arrived in Washington DC for bailout hearings in three separate private jets, prompting derisive comments from members of congress. The PR misstep has haunted Detroit ever since, inspiring federal rules barring bailed-out automakers from using executive jets, and making transportation choices for auto-related DC hearings a major priority for automaker PR: Toyota’s Jim Lentz clearly had the episode in mind when he arrived for recent hearings in a recalled and repaired Toyota Highlander. And thanks to a recent revelation about GM Chairman/CEO Ed Whitacre’s use of executive jets, furor over auto-exec transportation is clearly a long way from playing itself out.

The Detroit News reports that a clause in Whitacre’s $158m compensation package from AT&T includes ten hours per month of company jet time, at a cost to the company of about $20,000 per month. And despite the facts that Whitacre’s jet use isn’t costing taxpayers anything, and that jet use makes up a relatively tiny fraction of his overall AT&T compensation, the lingering shadow of Jet-Gate makes this big news. David Lewin, a professor at the Anderson School of Management at the University of California, Los Angeles, explains:

It’s more than a perception problem. If I was an AT&T shareholder or executive, I’d put up a stink about this

What Lewen leaves unsaid is that Whitacre first negotiated the deal when he retired in 2007. If it wasn’t a problem then, why would it be a problem now? A GM source apparently told the DetN that Whitacre was using AT&T’s jets to shuttle between Detroit and his ranch in San Antonio, a leak that prompted GM’s VP for Communications Chris Preuss to commentIt’s something he uses at his discretion. If he’s using it to commute to and from San Antonio, I don’t know. How Ed chooses to get to and from San Antonio is the same as how I get to and from Northville. It’s my prerogative how I get to work and how he gets to workAt least it was before Jet-Gate. After all, the anger generated during Jet-Gae was rooted in the very real perception that Detroit’s executive classes were unaccountable and overcompensated relative to their companies’ performance and need for public assistance, a perception that was proven true by the rejection of three GM and Chrysler “viability plans.” Or, as an investment banker who represented GM’s dissident bondholders during that company’s bankruptcy puts it:this would play better if GM was actually making something of itself. Corporate perks are looked at very differently when a company is knocking the cover off the ball than when you’re on the public dole.Which was exactly the same problem that faced Detroit’s execs over a year ago. This latest blip on the post-Jet-Gate radar isn’t a sign that anyone in the media cares especially about whether AT&T is overcompensating its departed dear leader, it’s a sign that populist frustration with the government’s entanglement with Detroit has diminished only a little in the last year. Had GM and Chrysler made the taxpayers whole Iacocca-style since the bailout, this story would most assuredly not be worthy of its own headline. But with Chrysler’s turnaround still months away from resulting in material changes to its product lineup, and with GM’s struggling to rebuild its sales volume, the perception that Detroit’s executives still can’t right the ship is alive and well. Until that perception changes, scrutiny of executives at bailed-out firms will continue to be fiercely suspicious of anything that even remotely resembles premature self-congratulation while the taxpayers continue to underwrite a turnaround that shows few signs of materializing.