Bailout bonuses
11/11/08
[donation]
By Joel Thurtell
The company (Ford) will also eliminate merit pay and bonuses next year.
— Detroit Free Press, November 8, 2008
The automaker (Ford) is moving to increase its cash by as much as $17 billion by cutting more jobs, eliminating bonuses for salaried workers in 2009 and reducing its capital expenditures.
— New York Times, November 8, 2008
Talk about chutzpah.
Talk about shameless posturing.
I’m trying to get this straight. The Big Three automakers have been crying desperately poor for months and months.
Hats in hand, the car makers along with their principle union, the UAW, have been lobbying Washington politicians seeking a multi-billion dollar publicly-paid rescue of their industry.
Doesn’t it seem like companies that are asking for billions in taxpayer-funded charity would at least have the decency to quit giving their staff merit raises and bonuses?
Yet we learn that despite its claimed desperation, Ford Motor Co. has been paying merit raises and bonuses this year — at the same time Ford, General Motors and Chrysler are making their case for a federal handout.
The Big Three have already cut thousands of hourly workers and salaried staff, shuttered numerous plants, yet they still couldn’t see removing merit pay and bonuses as a priority?
The Big Three are failing. Yet they continue rewarding managers with bonuses and raises?
It doesn’t occur to them that it might be stupid and unseemly to keep rewarding people who collectively are making this failure possible.
Why are they rewarding themselves for failure?
Well, because nobody is stopping them.
We are told that the loss of even one of these industrial giants would be terribly destructive to our national economy. They need to be propped up with government largesse because they are TOO BIG TO FAIL.
Maybe.
Or maybe they are TOO BIG TO SUCCEED.
Too well-paid.
Now we’re hearing that they are not only too big to fail, but GM CEO Rick Wagoner claims even filing for bankruptcy would be devastating — who would buy a car from a bankrupt automaker?
Good point. Something Wagoner might have thought about long ago, when GM was churning out high-profit, gas-guzzling Suburbans and Hummers instead of catching a hint from Honda down there in Marysville, Ohio with its fuel-efficient Civics and Accords. Somehow, Honda, Toyota, Subaru and a flock of other foreign-owned automakers are still afloat and not begging for handouts.
Anything to be learned there, Rick?
Nah. Nothing to be learned when you reward continued failure with merit raises and bonuses.
Here’s why I think a Chapter 11 bankruptcy could be a good thing for Detroit and Dearborn.
There would be no infusion of free money that current managers could throw away on more bonuses for buddies.
Instead, the top guys at Ford, GM and Chrysler would be out. A federal judge would appoint a creditors’ committee to oversee rebuilding the business. A judge might appoint a monitor who could act as a receiver, with power to make and break contracts including agreements with suppliers and, yes, gasp, unions.
I’m thinking of what happened in the 1980s when the little town of Ecorse, Michigan went bankrupt. The city’s officials had perks like taxpayer-paid cars, secretaries, an ice rink and bloated police and fire overtime payments that they refused to forego, even though they couldn’t pay their utility bills. A Wayne County judge appointed a receiver who was a dictator. The city council and mayor had no power. The receiver slashed the perks, broke the union contracts, closed the ice rink and put the city in the black.
Great success story. Well, after elected officials took over, they managed to steer the city back into the red.
It would be too bad if that happened to the carmakers. But remember Chrysler — they got a bailout two decades ago, and now they’re back, beggars again.
We can’t afford to think that far out now. The tough decisions need to be made soon.
Somehow, the culture of gimme that commands Detroit has to be replaced with a rational approach to automaking. Short-term profiteering has to give way to long-term planning.
Who’s gonna do it? It’s evident that the people running those companies haven’t got a clue how to fix themselves.
Help has to come from outside. It will never be accepted willingly by the Rick Wagoners who are still clutching at power and are so so so fearful of bankruptcy.
What Rick really fears about bankruptcy is losing control, like the mayor of Ecorse lost control when a judge appointed a receiver.
The best thing for Detroit and Dearborn right now would be a dictator who could tell the CEOs to take a hike.
The new super boss could impose real austerity, dig deep into the fat that remains, cut, cut, cut. And make real plans for manufacturing really fuel-efficient cars that would overtake the foreign models and put Made in USA back in business.
And oh yes, the new czar should put those bonuses in a black hole where they won’t be seen till the companies turn a profit.
Drop me a line at joelthurtell(at)gmail.com
