Editorial: Between The Lines: AN Pimps for GMAC's CEO
Automotive News [AN, sub] does an excellent job covering the industry. Most of the time, AN is an unbiased if largely toothless conduit of autoblogospherical fodder. In other words, they report, we decide. But today’s column by Editor David Sedgwick is, well, appalling. No, really. I am shocked at the depths of disinformation, dissembling and, yes, dishonor to which AN and Sedgwick have sunk. “GMAC’s chief has a chance to earn his millions” begins by asking “Is Al de Molina worth $11.6 million?” The obvious answer has Will Smith written all over it: oh, HELL no. Unless, of course, you’re one of the Cerberus insiders who benefited from the Fed’s last minute rule change. You know, the one allowing GMAC to become a bank when it didn’t qualify for bank status. Oh, and then there’s Uncle Sam’s $6B GMAC bailout. So yes, I guess Al de Molina is worth the big bucks to someone. Sedgwick’s column, on the other hand, isn’t worth the paper it’s printed on.
Clearly, GM and Chrysler did not have an especially good year. But what about GMAC? Last fall, the company nearly collapsed after its access to credit dried up. In November and December, GMAC halted auto loans for consumers, and it toughened its terms for inventory loans for dealers.
I was prepared to give Al a hard time about the company jet and his “heads, I win; tails, I win anyway” pay plan. But when I got him on the phone the other night, reality intruded.
Saying GM and Chrysler didn’t have “an especially good year” is like saying the Brits took a bit of a drubbing at Isandlwana. Only without whatever honor the massacre entailed.
Aside from that, Sedgwick’s failure to mention GMAC’s own culpability in its demise—and the wider effects on the U.S. economy—is a glaring omission. As TTAC reported at the time, GMAC wrote forests of bad paper. It actively worked to lure millions of Americans into cars and houses they couldn’t afford. GMAC’s short-term greed fueled the housing bubble and encouraged GM to over-produce, and then over-produce again. And again. Until the market collapsed.
Anyway, “reality intruded?” What reality might THAT be?
A $6 billion emergency aid package from the Treasury Department in December kept the company afloat. But GMAC is still in trouble.
This spring and summer, the company must roll over $11.8 billion in unsecured debt. Since credit markets are still frozen, de Molina says, he can’t do it without federal help. “This is a tsunami coming at us,” he told me. “I don’t want to be the guy who pulled the plug on GM.”
So the reality is that GMAC is still in deep shit, so why give the CEO a hard time? (Translation: in Bailout Nation, we’re way too busy to make anyone responsible for their actions. Or even LET them be responsible for their actions.) To be fair, Sedgwick makes a stab at it. Or should we say feint?
OK, but what about his pay last year, while GMAC nearly went down?
De Molina was refreshingly honest. When he joined GMAC in 2007, he signed a contract that he says would have made him a very wealthy man. If things went well, de Molina figured, he’d earn $100 million or even $200 million over five years.
De Molina’s admission that he had an obscene compensation plan as the lender teetered on the brink of bankruptcy is “refreshing”? Define “refreshing.” That said, I’m no fan of executive pay limits—or any other government intervention in the inner workings of a privately-held company. But we’re supposed to feel sorry that de Molina made “only” $11.6M. Does Sedgwick have a clue how bad it is out here?
I know what you’re thinking. So allow me to be Al’s public defender:
— GMAC’s meltdown was triggered by losses in its mortgage unit. You can’t pin that on de Molina, who joined GMAC after its plunge into subprime.
— GMAC’s owners, Cerberus and GM, helped set de Molina’s pay package. So it’s not the same situation as a publicly traded company, where good-ole-boy directors shower dollars on the lucky CEO while investors sputter.
— Last year, de Molina’s use of the company jet was valued at $2.3 million. But he notes the plane took himself and company execs to New York to negotiate GMAC’s bailout.
“It wasn’t Al flying alone while he got a pedicure from the stewardess,” he said. GMAC dumped the jet. DeMolina, who lives and works in Charlotte, N.C., now flies commercial.
I swear to God I’m not making this up. Segwick’s final prognosis: if de Molina keeps GMAC alive, he’s worth the money. Hang on; what if he continues to use our tax money to do it? And what if he doesn’t? Will he give back his salary? Color me disgusted.
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