Assuming Detroit is about scarf several billions of your children’s children’s children’s tax dollars, I think you have a right to decide what strings should be attached to the bailout bucks. So, what strings do you think should be attached to the bailout bucks? Although Washington and Detroit see all three ailing American automakers as much or a muchness, TTAC readers are well aware that there are three types of epic failure involved. In GM’s case, it’s everything: models, brands, dealers, advertising, management, product development, you name it, they’ve screwed it up (with the possible exception of pickup trucks). Some kind of wholesale management slaughter– from mid-level all the way to the Bored of Directors and every Wagoner, Lutz, LaNeve and Henderson in between– would at least give me some sense of vindication (and it IS all about me, no matter how much I protest). How you can restructure GM without playing the Chapter 11 “get out of 50-state franchise law and UAW contracts free” card is beyond me. But perhaps not you. (OK, now it’s about you.) In Chrysler’s case, how do you prevent those rat bastards at Cerberus making a penny on this deal at any point ever? And if GM’s glue-on-the-hoof, what of Chrysler? Personally, I’d rather invest in Tesla. But as Pooh says, what to do? What to do? Or is that Eeyore? Ford is the Golden Child. Or, more precisely, the kid who’s coughing but not showing any other signs of plague. Yet. Seems to me they’re on the right track, but running out of rail. And maybe we should get rid of those pesky Fords who call the shots at Ford (I originally typed “shits” but that’s just my subconscious talking). Or not. I dunno. I’m thinking about all this for an editorial. Little help?
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In a response to a previous article someone, I can’t remember who, contrasted previous bailouts in England and France. I remember them saying that the one in France worked because they tossed out all the people at the top while the one in England didn’t work because they left the managers in place to waste more money. It’s kind of simplistic but that would do for starters.
Accountability and responsibilty, long-term. And, oh yeah, a restructuring plan? That actually means something?
here are my strings attached for GM:
1) Dealer franchise contracts voided
2) UAW contracts voided
3) US design/engineering/manufacturing jobs need to be kept…less the bailout become paid by the taxpayer yet the jobs exported, which would be completely insane. The idea is that with #2 fulfilled, US jobs can be competitive. Yes, Americans will suffer with the UAW being broken, but it is a must in order for the industry to survive.
4) Wagoner goes, an outsider fills his spot
5) Get rid of Pontiac, Saab, and GMC, at least. Saab can be sold back to the Europeans. Pontiac and GMC are worthless brands and mean nothing. Buick is close, but the fact that they carry status in China is powerful. I feel that is being mismanaged now, however (with Daewoo-rebadges, of course), so Buick could be cut. Saturn can also have purpose…
Chrysler, as nothing but a shell organization now, is worthless.
My worry about Ford, is that with GM and Chrysler going bankrupt and potentially breaking UAW contracts under a guise of reorganization, will then be rendered uncompetitive. Will they eventually have to file Chapter 11 also, just to stay in business?
If the idiot politcians are going to give away the money to them, then:
1) Demand all the top Administration be replaced
2) Demand the BOD’s be replaced (as they have done such a wonderful job in stewardship of the companies they have a fiduciary duty to oversee survive)
3) Demand a full independent accounting of the financials of the companies to see how badly the books may have been cooked, and if nefarious behavior found, prosecute.
4) All monies given have to go into a trust fund of sorts and cannot be spent without independent oversight and for very narrow purposes on matters that strictly involve the survival of the company (no big parties like AIG had out here in California, no funds for pensions, executive retirement accounts etc.)
5) Get rid of all frills, company jets, executive washrooms, company cars, expense accounts, and any and other management perks. (Some will say no one will stay around and work, so what? those who do will be rewarded with a paycheck if they do their jobs properly).
This would be a start.
All the top execs at GM is one thing, but Ford’s got a pretty good team at top at this point. Why demand that they leave if they are doing the best job they can at this point?
Again, I don’t think this money should be that heavily invested in the automakers at all. Maybe a few billion for their plant overhauls, but take any new money and establish the UAW VEBAs and then support the suppliers so that they can weather the bankruptcy of one, two or three of the automakers.
I think another good direction to consider is to buying equity in the company. You can buy $2bn of newly issued equity and own 49% of GM now. Then, you can use your powers of persuasion to seat some of the Board and force GM down a particular path with any money that you loan it. Talk about oversight.
All senior management fired, and no parachutes. OK, tomorrow is Armistice day, and it was Wilson who made the mistake of calling for the Kaiser’s head –and that lead us to noplace good. But the idea that Detroit has “talented” execs is laughable, and they don’t deserve so much money for their services.
If they want an emergency loan, fine. But you have to make it clear that buck stops — if you go to government for a bailout, you’re not keeping your job.
Ford management has gotten some good press. Throw the baby out with the bathwater.
The 25 billion is then enough to get them through the next two years.
Real problem is how to bailout consumers so they start buying cars. $5000 tax credit for an American-made car is a start.
Chrysler is gone. Sorry. Sell Jeep to GM or the Koreans. Close everything else. Only about 150K jobs.
What would a bailout be good for? I can think of three things.
To preserve jobs and pensions.
To preserve the industrial base of America.
For keeping a company viable, i.e. guaranteeing warranties and a certain resale value of product.
Being a lefty European type, for me the solution is pretty simple (and it worked wonders for the Swedish banking sector around 1991). Nationalize any company that is bankrupt. Fire all upper management. Pay salaries, health insurance and pensions with taxpayer money. Offer no compensation to shareholders. Get the best management around (meaning: with a proven track record for industrial turn-arounds). (NB: it’s a crony-capitalist myth that good managers need millions to do their job. CEO jobs are not a buyers market anymore). If it has to be a Ghosn, let it be a Ghosn.
Help the company weather the storms, declare the government will guarantee warranties etc for several years, and then sell the company in 2018.
Shouldn’t that be nooses, not strings?
(btw, you kinda said it all in your open letter to Barack)
-anyway:
<fantasy>
For management+bod, anything short of “The Ban”, in the Biblical sense, (ie: kill ’em all, http://gbgm-umc.org/UMW/joshua/may2324.stm) would probably be a shade too mild.
<utter delusion>
Returning to ~some? type of (vw, cough cough) ‘Principles’ like: Build great-looking, well-built, reliable, high-quality cars that are affordable for the average dude and pay your workers a fair, US-adjusted living wage. ?might? be a place to er, -start???
</utter delusion>
Blow up the UAW, pay all the bolt-tighteners $20/hr (in 2008 $$$, indexed) + 401k (50% match) + Health, henceforth. No unions, no union overhead.
Encapsulate & Jettison the pre-existing pension/health Borg into the Phantom Zone.
“Ben & Jerry” the by-laws. Ie: No Exec will EVER, by-hook-or-by-crook, get paid (in toto) more than a certain Multiple of the lowest-paid nut-fastener/floor-mopper, CEO-not-to-exceed ~$2m/yr (in 2k8 $$$, indexed).
Mandatory Oil-Shock-Resistant architected product lineup + quantities.
Sample Archetype Lineup: Polo, Golf, Mazda 3, Passat, M3, M5, 750i, Corvette, F150, X5
All Cars produced must meet Independently Created & Tested Quality, Reliability, Aesthetic, Mileage, & Sticker Price parameters vs. segments + averages.
-If Fail, entire schema rejected back for next iteration/rev.
</fantasy>
—
<moral imperative>
Still like to see everyone above the job of Project Manager for the last 15 years, forced to surrender all their money and possessions to the company and then be launched into the Sun,
or at the very least, forced to do the “Elephant Walk” on the lawn of the Washington Mall, in the nude, 8 hours a day, for the next 4 years, -By Law.
</moral imperative>
—
Hundreds of people who have Tons of employment choice risk their lives for this country as intelligence operatives -for not that much money-, because they have the Ethos.
-That same filter should apply to carco management pay.
—
I can’t decipher the numbers, but ?supposedly? US Automfrs pay $75/hr for its workers, $50 or more ends up in UAW hands, for one reason or another.
—
=>(SUM: above) == Moot.
it’s all gonna crater, you can’t change/control people who won’t be; and no functioning structure will eer be imposed.
ttac has been right all along. us auto must reap what they’ve sown.
KISS. (keep it simples stupid)
sure we can say, do this and this and this and this. but isnt that the job of the CEOs and all the smart guys with the big offices? So, how do you get them to do the job? Motivation.
3 easy steps to reviving GM
1- clean sweep all of the upper level management
2- all new management works for $1 per day until the company turns TWO profitable quarters with proof that it will be stainable.
3- once profits are flowing management is compensated proportionably to the amount of profit.
its clean. its simple. and it would work AND it would leave the governments hand out of making all the hard calls. what does anyone in Washington know about running a car company?
edit- i feel that Obama should do the same to his salary. take $1 a day until our economy is working right again. and he should call on all other members of the senate and what not to do the same. they all have millions in the bank, they will be fine. (ps- i know im living in a dream world but i would have alot of respect for anyone that did that)
The implied assumption in all of this bailout palaver is that there is something here worth saving; something that has the possibility of eventually functioning as a profitable business. A rational business manager would identify the useful components and remove everything else. But we are not talking about rational business managers here, we are talking about sniveling political hacks, so string theory just doesn’t apply. How’s a politician who’s been bought by the UAW going to tie a string around the union? Who’s going to hold down the dealers while the franchise agreements are tied off? This problem cannot be fixed with string or glue or band-aids. Do the surgery first and then help out with the cost of intensive care.
Seppuku wouldn’t be asking too much would it?
How about “every dollar gets repaid, with interest.”
As well as promoting competent and passionate persons from within the company for reasonable pay. You know, the ones that didn’t get while the getting was good.
I really think this country should provide universal health care, just start copying the programs of countries where it’s been seen to work out relatively well. Steal what works and adapt for what might not. That would remove the Pension Retiree and UAW health benefits cost from all of their cars prices, plus they wouldn’t be able to cry about an “unfair playing field” with Toyota and the rest of the 40% imports.
Of course this is nothing that hasn’t been suggested here on TTAC somewhere already…
The Vulcan marionette is good, but I’m thinking that a shot from the Team America sex scene would be more appropriate. You know the part I’m talking about…
Chrysler gets nothing. Claim that they are ineligible because they are private, then let Cerberus Ch 7 them. Cerberus has really gutted Chrysler into a shell organization anyways, no need to prop them up.
I am STRONGLY opposed to giving GM anything because I think that they are screwed up beyond repair, Ch 11 or no Ch 11. But if the feds just HAVE to give GM money, it comes with the following rules:
1. All upper management (except for Lutz) gets fired. New, outside management gets hired, and all executive salaries (including Lutz’s) are slashed to just $1, and must do so until GM has a profitible YEAR, and it is proven that GM can sustain profitibility.
2. GM has to file for Chapter 11 bankruptcy. The Feds will convince them to do this by helping to create a massive publicity campaign to comfort American buyers into knowing that GM is not going anywhere, and they are safe in buying their products. And in case the inevitible happens, their vehicles will have third party warranties and third party companies will be suppling parts for years to come.
3. Rick Wagoner gets fired with no severance package and he has to pay back the $100 million he earned as GM CEO. On top of that, he gets criminally investigated, to see if he ran GM into the ground purposely for his own personal gain.
4. The UAW contracts are voided, as well as dealer contracts, allowing GM to cut away all that is needs to go back to a sustainable size.
5. The US feds get a majority stake in GM, so they can call all of the shots, and if another Rick Wagoner or Roger Smith manages to get into an upper rung of the General and starts screwing everything up, he can quickly be canned with no severance.
6. Every brand except for Chevrolet, Cadillac, and Saturn must be killed. Saab must be spun off.
7. GM must be restricted from outsourcing and must keep as many jobs here as possible. It can cut away excess jobs all it wants, but if it is going to create new jobs that relate to its US operations, it must be here in America. They can only hire overseas if the overseas jobs pertain only to GM’s overseas operations. If they violate this rule, they will be punished by hefty tax increases.
8. GM must repay the loans, and can not recieve any additional funding from the government. If they just end up pissing the $25b away, then tough shit for them.
Really though, if you ask me, Detroit shouldn’t be bailed out. This is nothing but simple Darwinism. Nobody wants to buy their cars anymore, so they should die. Why should we prop up these failing corporations that nobody wants to buy products from just to save jobs? This is just how the economy works.
GM and Chrysler need to be allowed to die. In fact, I at times, believe that Wagoner could have been pulling an Enron with GM. GM should be allowed to go down so this can be invistigated.
After GM and Chrysler go down, the government should shove all they got into Ford, since they have smart management and a competetive product portfolio with many promising new models in the pipeline. It would suck of the feds would ford Mulally out of power at Ford, because at this point, he seems to be the only Detroit executive w ith a brain.
In other words, Ford is the only one that should be bailed out because they are the only one that are capable of being saved.
Its not what strings, but what is worth saving, then attach strings.
These folks want taxpayers money to keep on doing what they are doing with the reasoning that if they shut down it will be unbearable.
Detroit is melting down, prior to bailing out a “triage process” is done to see what is deserving and promising to be bailed out.
Does top management deserve to be bailed out?
Does the UAW deserve to be bailed out?
Does every model and make deserve a bail out?
Does the dealer franchise system deserve a bail out?
Do the legacy cost and retiree deserve a bail out?
Do all the plants deserve a bail out?
Do the shareholders deserve a bail out?
Do the bond holders deserve a bail out?
Does Detroit and the D3 with their chronic and inexorable problems, lack of performance, lack of results deserve a bail out?
Do the employees deserve to get bailed out of being pawns of decisions made by the management team that is looking for a bail out?
If not Chapter 11, then “reboot” and “reset” with a ferocious resolve to effect change that is future oriented.
Just throwing money at the “Detroit patient” is not wise.
In the event of a D3 bailout, what’s to stop Toyhondanissan, Hyundi, Kia, BMWAudiBenz and everyone else complaining to the WTO?
I would offer a tax incentive to anyone purchasing a domestic car or truck. And no, not domestically produced. Purchased from Chrysler, GM or Ford. Why not?
I think that the only way for long term survival would be a medium term nationalization as described by Martin Schwoerer.
However, there would have to be a couple of steps in between nationalization and then privatizing again:
1st) The biggest problem in the pusuit of profit are probably the legacy costs. This of course is also the fault of the Detroit boys, as they thought that they could use future profits for future retirees…too bad those profits weren’t certain in any way, while humans tend to reach retirement age on a rather solid basis. So to just fill the gap won’t be enough. There have to be new rules for how to deal with pensions. The best thing would be to outsource this entirely and let the insurances deal with it. In the short term, that would be more expensive, as this would increase the costs of every job since the employers would have to pay the insurances on a monthly basis for each employee. In the long term however, there would never be a gap in any pension fund, because GM et al couldn’t just tap into it when they need quick cash. This would make pensions something that’s easy to calculate.
2nd) The next thing on the list would obviously have to be product. After all, it’s the cars, stupid. A nationalized car company should put as much resources into R&D as possible because that’s how you generate future profits.
3rd) Next on the list is branding. TTAC has dealt quite a bit with this before. While I don’t see a simple solution for a big company like GM, I could see a way out of it: Split the fcuk up! Should the government take control, then they better treat every brand as an individual company. They could pool in on things like R&D or purchasing, but the management should be completely seperate. Then, when GM/Ford/Chrysler are ready to be given back to the free market, bring each brand to the stock market seperately and let evolution do the rest.
In the event of a D3 bailout, what’s to stop Toyhondanissan, Hyundi, Kia, BMWAudiBenz and everyone else complaining to the WTO?
Well, probably because the Japanese and Korean governments have financed a lot of the work done at Toyota, Honda, Nissan and Hyundai. They won’t go to the WTO – because it will just start a PR war that might not benefit someone like Toyota. I would be willing to bet that the European automakers would have a stronger case.
However, that said, the U.S. government can make a good case that the destruction of GM or Chrysler could set off hundreds of thousands of layoffs and destroy the economy. This is a defensible position for government investment in a particular industry or to a particular company.
The strings should be attached from the lamp-posts in Flint to their necks.
Detroit-Iron: That’s the first thing I thought when I read the article, but you beat me to it.
Well, at least we already have two signatures for that petition…
Public executions would surely make executives and BOD think twice about screwing things up. And no amount of D&O insurance would save them from that!
It won’t happen, but if Michigan wants all this money, then they should have to become a right to work state so that their industries might have a chance to survive, and above average workers might actually stay.
GM:
Step one: Buy the company.
Seriously. GMs market Cap is under 2Billion. The amount of bailout money they need dwarfs this.
Step two: Declare bankruptcy. (after the government owns it).
Chapter 11 so anything can be reorganized.
Step three: Slash and burn. Now you bring in a team of accountants and tough managers to go over everything. Kill weak plants, kill redundant models/lines, renegotiate contract, get lean and mean.
Once there is a handle on the business, fire the entire executive management team. Do it while under Chapter 11 so you don’t have to pay their ridiculous golden parachutes.
Introduce a fair wage structure across the company, top to bottom, meaning everyone gets less than today, but have healthy profit sharing for everyone, such that this represents a significant portion of income. And no we won’t be paying the CEO a dollar, that only works for owners. No one of any quality is going to work for nothing.
Chrysler: Ignore it and let it die. Useful assets(Jeep) can be purchased free and clear by survivors. Sometimes the weak must die to improve the health of the herd.
Ford: Do GM first and see if Ford still wants government “aid”?
I only have one string to be attached:
1. Make white collar/execs drive their own cars
2. Make them buy their own cars…FROM a dealer. No discounting to anyone. Go in…haggle and buy, like the rest of the serfs.
3. Make them take their cars in for service, like the common folk.
4. Get rid of the exec. garages, where special mechanics fix everything or bring the execs a new car because they are “too busy” to take it to a dealer.
Trust me…you will see change…fast. The execs don’t buy their cars, take them in for service or deal with waiting lines or haggle about the broken thingamabob and whether it was/wasn’t a warranty item. That’s why the whole process is rotten to the core. They don’t eat their own dog food.
Willman,
there is an economic reason why the bolt-tighteners aren’t paid $20/hr an hour and it has nothing to do with unions. “Bolt-tighting” is one of the least fun jobs in the world, it is extremely boring but you can’t make a mistake because that would cost a lot of money nor can you wonder off for a few seconds seconds because that would lead to an expensive band-stop. This means that hiring during a recession isn’t a problem but that during a boom you not only have the problem of hiring the extra people but also the replacements for most of your workers as they can find $18/hr work outside your plant. Add the fact that a carplant needs a lot of “bolt-thighters” and you really need to pay the “bolt-thighters” high wages or they will leave at exactly the moment you need them the most because the local economy is couple to your fortunes and will boom when you boom
bolt tightening is important, but so is welding a pressure vessel, constructing a bridge, etc. businesses have to compete for employees, that’s a fact of life, and it’s not done by simply paying 50% higher wages. successful businesses throughout the u.s. are able to retain and recruit great employees while paying market-competitive wages. the company i work for is one of these.
regarding the union vs. non-union argument, i’ve managed projects in both environments and certainly have developed a preference. managing projects in a union environment is like trying to work in the dark…you can get the job done, but your competitor is capable of running laps around you.
In this we differ. Bolt tightening is not an important job. Anybody can do it. I can do it and i hope you can do it too. But welding is something i can’t do. I could learn it but it would take a few years before i would get good at it. You can be proud of every welding job you do. Bolt-tighting isn’t like that. It is unimportant but with a lot of stress and you simply have to pay for that stress.