Automotive Industry Bailout: Management, Union Out of Touch
Watching the CEO's of the Big Three automakers fly into Washington D.C. in their private jets...three of them...I couldn't help but be reminded of the album released by Commander Cody and the Lost Planet Airmen entitled, "Lost in the Ozone Again".
I can't help but be struck by how out of touch with the average American these members of the elite managerial class are. We have seen other evidence of this lack or perspective by other executives in other industries - the recent excesses of AIG executives comes to mind. Having only days before secured $85 Billion in federal funds to prevent their corporation from failing, they indulged themselves in a lavish $440,000 "retreat" at the St. Regis Resort in Los Angeles, including $23,000 in "spa treatments."
This "Let them eat cake," mentality appears to be endemic to this managerial class. Members of this elite group protect their own. Those who have manifestly failed in their assignments rarely suffer the consequences of their failures. They are merely picked up by the board of directors' brethren and hired by the board of some other corporation. They receive huge compensation packages and even larger "golden parachutes" that make termination or forced retirement prohibitively expensive.
Now I am a capitalist, a free-marketer who believes that government involvement in private industries is not just counter-productive but destructive. Our economic model, the model which made America the most powerful economic force in the world depends on the right of businesses to succeed or fail based on their ability to respond the market forces and the needs of their customers.
Businesses must be allowed to fail when they are no longer viable. Survival of the fittest is not only "the law of the jungle," but should be the law of the market. Competition breeds innovation and keeps prices down.
Capitalism is a two-edged sword. The truth is I have never had a problem with CEO's and other corporate executives making as much money as their stock-holders choose to pay them. If corporate stock-holders choose to give their corporate executives %300 Million golden parachutes, more power to them. Too me these levels of compensation seem wasteful and foolish, but if the market sustains them that's the stock-holders business, not mine...or the government's.
When I do have a problem is when these same wealthy executives come to congress, cap-in-hand, looking for tax-payer dollars to bail them out for poor decisions. That they did so in their corporation's private jets - each separately - suggests that these corporations have not gone to any lengths to cut their overhead costs.
I also have a problem when members of our government, beholden to external parties - like unions - seek to use tax-payer funds to pay those external parties back for their financial and political support. It is clear that the prime motivation behind the push - primarily by Democrat members of Congress - to provide $25 Billion in federal funds is motivated by their political indebtedness.
Corporate America has been gradually moving toward the Democrat Party as they look for a partner to help them compete in the global market; pretty much the antithesis of our historical economic model. I hope they enjoy their new partners in business because if things continue in the direction they are currently moving, these corporate executives will soon be working for the government.
Democrats favor the bailout by a margin of 60:36 Republicans disapprove by the same margin, 65:35. These numbers grant us a unique look into the mindset of both parties. Democrats have always leaned towards the socialist model of economics, Republicans towards the capitalist model. Democrats don't want to be forced to compete for jobs and compensation; they want to be taken care of by a paternalistic government.
What is disturbing is that as many Republicans are supportive of the bailout proposal as do. I've heard all of the arguments, mainly consisting of dire predictions for our economy should the bailout not occur, but until the UAW workers accept contracts which put labor costs-including employee buyouts and pension costs equal to those of the Japanese and Korean car manufacturers' employee expenses, I will remain unsympathetic.
I can't help but be struck by how out of touch with the average American these members of the elite managerial class are. We have seen other evidence of this lack or perspective by other executives in other industries - the recent excesses of AIG executives comes to mind. Having only days before secured $85 Billion in federal funds to prevent their corporation from failing, they indulged themselves in a lavish $440,000 "retreat" at the St. Regis Resort in Los Angeles, including $23,000 in "spa treatments."
This "Let them eat cake," mentality appears to be endemic to this managerial class. Members of this elite group protect their own. Those who have manifestly failed in their assignments rarely suffer the consequences of their failures. They are merely picked up by the board of directors' brethren and hired by the board of some other corporation. They receive huge compensation packages and even larger "golden parachutes" that make termination or forced retirement prohibitively expensive.
Now I am a capitalist, a free-marketer who believes that government involvement in private industries is not just counter-productive but destructive. Our economic model, the model which made America the most powerful economic force in the world depends on the right of businesses to succeed or fail based on their ability to respond the market forces and the needs of their customers.
Businesses must be allowed to fail when they are no longer viable. Survival of the fittest is not only "the law of the jungle," but should be the law of the market. Competition breeds innovation and keeps prices down.
Capitalism is a two-edged sword. The truth is I have never had a problem with CEO's and other corporate executives making as much money as their stock-holders choose to pay them. If corporate stock-holders choose to give their corporate executives %300 Million golden parachutes, more power to them. Too me these levels of compensation seem wasteful and foolish, but if the market sustains them that's the stock-holders business, not mine...or the government's.
When I do have a problem is when these same wealthy executives come to congress, cap-in-hand, looking for tax-payer dollars to bail them out for poor decisions. That they did so in their corporation's private jets - each separately - suggests that these corporations have not gone to any lengths to cut their overhead costs.
I also have a problem when members of our government, beholden to external parties - like unions - seek to use tax-payer funds to pay those external parties back for their financial and political support. It is clear that the prime motivation behind the push - primarily by Democrat members of Congress - to provide $25 Billion in federal funds is motivated by their political indebtedness.
Corporate America has been gradually moving toward the Democrat Party as they look for a partner to help them compete in the global market; pretty much the antithesis of our historical economic model. I hope they enjoy their new partners in business because if things continue in the direction they are currently moving, these corporate executives will soon be working for the government. Democrats favor the bailout by a margin of 60:36 Republicans disapprove by the same margin, 65:35. These numbers grant us a unique look into the mindset of both parties. Democrats have always leaned towards the socialist model of economics, Republicans towards the capitalist model. Democrats don't want to be forced to compete for jobs and compensation; they want to be taken care of by a paternalistic government.
What is disturbing is that as many Republicans are supportive of the bailout proposal as do. I've heard all of the arguments, mainly consisting of dire predictions for our economy should the bailout not occur, but until the UAW workers accept contracts which put labor costs-including employee buyouts and pension costs equal to those of the Japanese and Korean car manufacturers' employee expenses, I will remain unsympathetic.
I have heard no compelling evidence that, given carefully structured government warranty guarantees, says that people will not buy a car from a company in Chapter 11 provided the restructuring is based on a sound business plan.
I suggest that the Big Three begin by selling off their fleets of private jets.
Long Live Our American Republic!!!!
What do you think?
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posted by Will Malven at 8:08 AM
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