Boomer Losers

Yesterday, CEOs of the big three automobile makers in the US made their pitch to Congress for an ADDITIONAL $25 billion bailout for their industry. Having already been authorized a $25 billion line of credit to "innovate" alternative energy cars, they are now asking the American taxpayer for an additional $25 billion that will buy them at most 6 additional months of cashflow. For example, GM stated that they are burning through $5 billion a month. They stand to get around $12 billion of a $25 billion handout. Therefore, a bailout would give GM anlittle less than 3 months additional time. Should Congress grant their wish? Congress is reluctant to do so.

These three CEOs demonstrated the dire straits of their respective organizations by the example of their behavior and that is why this bailout is a bad idea. First, while they will be forgoing their hefty bonuses, their salaries remain astronomical when compared to their well-payed rank-and-file. For example, the CEO of Ford makes some $28 million a year and he has taken that company to the brink of bankruptcy. Second, demonstrating that cost-cutting and sacrifice start at the top, all three CEOs flew to Washington on private corporate jets.

I agree that failure of the big three auto makers will be catastropic to the economy. Yet, it is investors who put a CEO in charge of Chrysler who, in his previous job, almost destroyed Home Depot while walking away with a $210 million golden parachute. It is the people talking to Congress that are the problem. It is the boards of these organizations who appoint and overpay these CEOs that are the problem. It is the investors who do not hold their boards accountable for gross mismanagement that are the problem.

Unfortunately, giving the people who are the problem more money is not the solution. There is a much better chance that real change will occur through a court-supervised bankruptcy than through legislated bailouts.

Investors wanted short-term profits at the cost of long-term survivability. Well, you got it and now you and the employees and suppliers and communities where these companies are located are all going to pay the price. As Dr. W. Edwards Deming once stated, "Survival is not mandatory."

Don't provide the bailout. Put that $25 billion toward paying the pensions of retirees who were guaranteed a pension when they worked at these companies. Congress let the companies underfund the pensions. Now Congress needs to make their mistake right, not dig a deeper hole. The Boomers are screwed either way.

[Posted with iBlogger from my iPhone]