Gangsters in pinstripes, or Incompetent Ivy Leaguers?

The CEOs of Detroit’s big three automakers are making their way to capital hill, hat in hand, to collect a $35 Billion dollar check. The question of the day is whether or not Ford, GM, and Chrysler should be bailed out. There is a lot of emotion that surrounds this issue. For the pure capitalist, they are saying let them fail. The politicians are all over the place. Some economists are saying that the fallout of letting the big three automakers fail will be massive.

Well, let’s examine the facts. Upon evaluating the financials of the Ford and GM, I found that the positions of those companies are so dire, that I would not put a nickel of my money in either of them. Ford has not had positive operating income in 15 quarters. That is almost 4 years. To be exact, Ford had net operating losses of more than $41 Billion over the past 4 years. Last year, GM disclosed that they met their cost savings objectives of $9 Billion. However, in the third quarter of the same year, they had net operating loss of $42.5 Billion. The last time that GM had a profitable year, Red Sox fans still believed in the curse of The Babe, Ricky Williams was a premier running back, Lebron James was a broke high school student, and Charles Taylor was a sitting president, and not a convicted murderer. Would you invest in businesses like these? Would the members of congress invest their own monies in these dismal, and horrific examples of American businesses?

Band aid solutions will not fix the big three. Giving them the $25 Billion, oh, I meant $34 Billion, is like giving a gallon of vodka, and the keys to your Mercedes to a 19 year old. It is simply reckless, and irresponsible. The only way to save the big three is to let them fail. Chapter 11 bankruptcy will allow them to negotiate everything from operating leases, and executive compensation, to hourly wages, and legacy costs. However, the gangsters in pinstripes, and/or the incompetent ivy-leaguers are against bankruptcy because they know that their compensation packages and golden parachutes will be affected.

The leadership at these companies need to go. Bob Nardelli, whose only claim to fame, is that he was a prodigy of the great Jack Welch, displayed his talent for driving a company into the ground while raping its bank accounts and disrespecting its shareholders, while he was at Home Depot. He sucked at his job, and for that, he got $210 Million when he was sacked. Yet the board at Chrysler found it prudent to hire him. That decision alone is cause to indict the entire board for either being gangsters in pinstripes and/or incompetent ivy-leaguers. Ford’s CEO got paid $28 Million for four months of work in 2006, while his company posted $12.7 Billion net loss in that year. GM’s Rick Wagoner’s 2007 compensation was $15.7 Million, while the book value per share of common stock was -$65, and the net loss for the year was $38 Billion.

As a result of congress’ request for a business plan, GM and Ford decided to implement the following cost savings plans:
1. Remove all batteries from wall clocks
2. Turn escalators off at night
It would be funny, if it weren’t so serious. ExxonMobil made almost $15 Billion last quarter, and even they turn their escalators off at night. Did congress have to ask management in Detroit to do that? Has the free enterprise system come to that? What I find incredibly difficult to grasp is the federal government’s love affair with failure, on one hand, and its passionate demonization of success on the other hand.

I am tired of the boy screaming wolf! I am tired of people telling me that the sky is falling. The financial services industry said that if they didn’t get $700 Billion to buy toxic assets, it would be the end of our economy as we knew it. To date, almost half of the allocated amount has been spent, but not a penny’s worth of toxic asset has been bought. Too big to fail? There is no such thing. If we care for American workers, investors, and the US auto industry at all, then we MUST let them fail. Giving them billions will be doing nothing but pouring money into a black hole, and postponing death. The responsible thing to do is to let them fail. They must die, and then, be rebuilt. Their business model is broken, and need to be fixed. Throwing money at this problem will NOT fix it.

BOOM M. Wilson
Unapologetic Capitalist, and Conservative Republican