by Deb Cupples | Bloomberg reports:
"General Motors, Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles."
"The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today." (Bloomberg)
Yes! Let's remove restrictions as we give private companies tens of billions in loans, shall we?
But first, let's take a glimpse at how some of the executives and board members who run those car companies have been spending money that makes it into the corporate coffers.
In 2007, for example, General Motors had record losses of about $38 billion. That same year, GM's CEO Rick Wagoner got a 41% raise (to about $14 million). While the CEO (and possibly hundreds of other execs and managers) were rewarded with pay raises as GM lost billions, the company laid off a couple thousand workers.
That was good for GM's execs but bad for our nation's economy.
In 2006, Ford Motor Company had record losses of more than $12 billion. Yet, the company gave its new CEO Alan Mulally $28 million for his first four months on the job. Mulally's total 2007 compensation was about $21 million. Four of Ford's executive vice presidents that year collectively took home about $39 million.
In short, just five Ford execs pocketed $60 million after a year of record losses (I don't know how much the hundreds of lower execs and managers pocketed). How many essential workers or supplies could that money have paid for?
In 2008, Ford planned to layoff hundreds of workers -- again, not good for our nation's economy.
What I can tell you is that Nardelli got a $210 severance package when he left Home Depot after six years as CEO; that was in addition to $245 million in compensation for his first five years. In short, I doubt he would have joined Chrysler for peanuts.
In 2007, Chrysler planned to lay off 13,000 workers over the following three years, which would just further harm our nation's economy.
The more unemployed Americans we have, the more people we have losing their homes, health care coverage and ability to feed their families. America's choice: let masses of laid-off workers (and their children) beg in the streets or spend tax dollars helping them out.
The effects of mass layoffs are broader than the families directly affected. The more people who lose their jobs, the fewer people are out there buying computers and TVs and cars and clothes and restaurant food....
In short, the more Americans that are unemployed, the less money is in circulation to support businesses large and small. This can lead such businesses to lay off their workers or even close their doors, which just means less money circulating in our economy to support businesses.
That's why unemployment tends to be bad for our economy.
The limited data above suggests that the people running the Big Three automakers might be more focused on enriching themselves (which doesn't benefit our nation's economy much) than ensuring the health and productivity of the companies they run (which would benefit our nation's economy).
It would require quite a bit of research to calculate how many workers could have been paid or how much equipment could have been bought if the Big Three's execs had not received raises -- or, better yet, if all of those execs had instead taken pay cuts.
And that's just direct compensation. Let's not forget the executive perks that get billed to the shareholders as legitimate expenses: things like use of private jets, corporate condos, expense accounts....
Seriously though, I do understand why Congress wants to help our automakers. Keeping them afloat would (theoretically, anyway) preserve jobs, which would help our economy.
If we taxpayers are spending billions to prop up those companies, then why shouldn't we impose conditions to ensure that our generosity really does result in increased productivity and jobs?
Given how the people running those companies have handled money when left to their own devices, can we really count on the honor system or their commitment to improving our nation's economy to ensure that execs spend our money wisely?
While I'm criticizing U.S. automakers, I can't help noticing that Japanese automakers have been selling cars in the U.S. for 20+ years: cars that are not only fuel efficient but also reliable.
U.S. automakers have refused to do likewise, which is why so many Americans buy Japanese cars. I say "refused," because it seems obvious that -- over the last 20 years -- at least one U.S. automaker could have reverse engineered a Honda Civic and produced at least one fuel efficient and reliable car.
None of them have come close to matching Honda's Civic or Toyota's Corolla. Apparently, improving the companies' health the old fashion way (by selling good products) has not been a chief goal of many of those people running the Big Three automakers.
It seems absurd to trust people with such weak track records to voluntarily use our tax dollars in ways that truly benefit this nation -- unless Congress ties specific conditions to the money it doles out.
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