Expert Professional Advice

1. Cutting their salary to $1 per year

2. Giving back the last five years of salary and bonuses to the company in the spirit of helping the company survive.

When their money is at stake they’ll be properly motivated to spend it better, perhaps without the jets, to help the company.

Taxpayers must demand that if our money is at stake then executive compensation must be revoked, and any potential stock options would have to be off limits for fifteen to thirty years before executives could cash in. The goal is not to reward executives for poor decision-making. When Rick Waggoner, CEO of General Motors was asked if he would be willing to reduce his salary to $1 like the CEO of Chrysler he refused, yet during the congressional panel he claimed that the bailout package is needed to “save the U.S. economy from catastrophic collapse.” It seems like he’s threatening that if you don’t help him the economy falls into a deep decline but he doesn’t want to sacrifice anything further because he has already pledged that he will reduce his salary fifty percent. That leaves him with around 3.5 million dollars… still rich, but way out of touch and not the guy I would want left in charge. What’s the point in giving money to the failures? Shouldn’t we expect more promising executives to take over from within in exchange for any bailout money? If they don’t want to step aside… maybe those companies shouldn’t get a handout. After all, when the consumer can’t pay for his car, does the consumer get rescued? And Ford’s CEO, Alan Mulally, when asked if he would reduce his salary to $1 a year, responded with a comment like “I think I’m OK where I am.” Is that so… no personal sacrifice, no government funds – the outrage is that these guys want the money and yet they refuse to contribute from their own pockets. That doesn’t inspire confidence in an industry recovery. The auto executives don’t want to give up the corporate jets – they’re not going to change – they’re way out of touch with the public… if they were in touch with the public they would be making better cars that people want to buy.

So, the simplest solution is to make banks aid autos which I haven’t heard in the media, except in the editorial of the November 24, 2008 issue of Financial Week titled “Make Banks Aid Autos” and the article states that it is obvious what is wrong with the auto industry:

1. Legacy costs

2. Lousy designs

3. Decades of general mismanagement

But an obvious short term solution, at least in the short term, which isn’t being considered is to make bailed-out banks help the car makers restructure themselves. The article further states: While it is not the government’s job to directly rescue every industry that’s ailing as a result of it’s own behavior or general economic circumstances, the U.S. is in a unique position to apply some pressure on lenders. When looking to attach strings to the remaining $350 of the bank bailout, Congress should consider requiring that the recipients of capital aid in providing debtor-in- possession financing and funding to support warranty services to the automakers. That’s not a direct bailout, but it would allow the automakers a smoother transition into a massive restructuring. After all, if much of the bank bailout feels like good money chasing after bad, why not make the banks throw some of it back to solve a problem they helped create?

In the December 1, ^{2008 issue of Business Week on page 70 there is a listing of upcoming cars, the Honda Insight (40-45 mpg est.) and Volkswagen Jetta TDI (30-41 mpg est.) appear to get about the same mileage as the Chevy Volt (50-100 mpg est.) which will cost ten thousand to twenty thousand dollars more… unless one of the big three automakers can really make a car that gets 100 miles per gallon. The Chrysler Jeep EV (50 mpg est.) uses technology similar to the Volt but didn’t have a price listed. And on page 22 of that issue is an article with an interview with Carlos Ghosn, the CEO of both Renault of France and Nissan of Japan and in response to a question regarding what automakers must do to survive and prosper he mentions “You want to have innovative products, strong fundamentals, a team that believes in the brand and believes the company will be ready to fight again. I don’t think everybody is going to make it through this period of time, but those who survive will have a boulevard in front of them because people will still need to buy cars.” If U.S. automakers aren’t making cars that people want, what’s the point of bailing them out? If the market doesn’t want to buy their product it seems like any government aid simply delays the inevitable failure… the government can prop up automakers but can’t force consumers to buy. And on the last page of the magazine Jack Welch makes a case for why the best thing to do is let the auto companies declare bankruptcy and get a fresh start because survival is not a business plan and not to be funded with public monies. His suggestion was to merge Chrysler and GM within bankruptcy and if any government aid was to be offered to provide it to Ford, which is in the best financial condition of the three – prop up the stronger and let go of the weaker. I’m not comfortable with the government operating in the automobile business as a player in the recovery – government does a bad job of innovation and business management (the U.S. postal service is an example). In the December 20, 2008 issue of the Economist, page 56: On December 11th, for example, Senate Republicans blocked a bail-out for Detroit’s carmakers. This thwarted the clearly expressed will of majorities in both the House and the Senate. But it was the right thing to do. A bail-out would either delay inevitable restructuring or (worse) put Congress in charge of it.}