Big 3 Bailout

From left, UAW president Ron Gettelfinger, Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli, GM CEO Rick Wagoner pause during a Senate hearing on the automotive industry bailout request. Image from AP Photo.

So as expected, Big 3 got what it wanted. Well almost what they wanted, USD 17.4 billion each for GM and Chrysler (Ford only requested for a credit line as its company restructuring loan package have been finalized last year). Prior to this, a friend was telling me that all the big hoo-ho about the CEOs from Big 3 being grilled by the White House and Senate, are all nothing but a political show - politicians way of showing to their constituents that they are careful in managing tax payer's money. I couldn't agree more.

It's not just about Big 3 forming the pillar of American manufacturing industry and is a bedrock of millions of jobs, billions worth of parts supply and other services industry contracts and forms the backbone of many local American communities. The American car industry, along with oil industry are the two main donors at American political campaigns. The beneficiaries, the Presidents and Senators have an "indirect obligation" to protect their interest. Together, the American oil and car industry form a very strong political lobby group.

Just look at the way CEOs from GM, Ford and Chrysler conducted themselves during their hearings at the White House. Which CEO of a business the size of Big 3 will allow themselves to attend a hearing in front of the Senate without any well thought out action plan? All the 3 CEOs seem to be doing their own thing, as though they are each facing three seperate crisis. Until now, we have not hear of any concrete plan to restructure the entire ailing organization or clear plans to deal with the problem head on.

All the Big 3 CEOs speeches are related to "we are launching hybrids by this year etc etc, we are cutting cost here etc etc, we are building smaller fuel efficient cars, we are renegotiatiing labour wages etc etc." These are not a crisis aversion plan, these are merely organizational improvement efforts which you should have been doing all this while, continuously. I still remember about 10 years ago Rick Wagoner was talking of the future of car business being more trucks, less cars. GM's product development czar Bob Lutz famously called global warming a "crock of shit" and thought of the Prius as an interesting "experiment."

Japanese automakers too form an informal alliance amongst themselves in lobbying for certain government trade policies / financial assistance to favor them, but unlike the Americans, Japanese automakers will work amongst themselves to ensure that everybody is speaking the same lingo. There is a strong effort by everybody to deliver cohesive action plan, one that is made in the interest of the nation rather than just for their individual companies.

On other hand, Rick Wagoner, Allan Mulally and Robert Nardelli simply cruised from Detroit to Washington in their seperate private jets and took their seats at the floor and gave their individual speeches that says nothing about how the 3 of them will come together to fix this mess they created in the first place! One can't help but get the feeling that they are just there to tell the government - "if you don't give me money I will close my business and millions of people will be thrown out of work. You wouldn't want that do you? Now show me the money."

The other thing is about Chrysler. Cerebus Capital bought Chrysler from Daimler AG after a failed marriage between the two cross Atlantic automakers. But Cerebus is a private equity investment firm, a fancy name for a company which deals with what Warren Buffet calls "financial weapons of mass destruction." Private equity firms are monsters of greed that are not subjected to the same kind of regulation and public accountability that traditional financial firms are. They see businesses not as sources of employment but "assets" to be sucked for profit and disposed off as soon as possible. Cerebus Capital however does not want to dig inside its own deep slush fund to inject capital into Chrysler, instead it wants to use US Federal government's USD 700 billion bail out package.

It's the typical story of corporate America - big guys in suits are eager to see quick returns on their investment, CEOs look at short term outlook and say to hell with the next 10 years because that's the next guy's problem, the everyday man on the street gets thrown out of his job for mistakes which he is not part of at all.


I have seen many weird religious nut case. But this has got to be among the top ten.
Greater Grace Temple in Detroit, Mich., held a special service Sunday called "A Hybrid Hope." Bishop Charles Ellis brought a special message entitled "A Hybrid Hope," calling people to pray for the auto industry. Image from WSJ.