Auto Execs Fly Corporate Jets to D.C., Tin Cups in Hand

[dbhost]

Well, I would say "Cry me a river", but these guys likely have yachts that would easily navigate up it. That is if it's a huge river and pretty deep as well.
The saddest part is this isn't the first time they have needed help. I doubt it will be the last either without some sort of an idiot cap on those earnings and bennies for the upper echelon.

5 mill a year is plenty!

I dunno, I wouldn't mind being above that tax bracket I think...

Just kidding...

I think executive compensation has been screwy for as long as I can remember... But it IS the executives that set the comensation right?

[jackellis]

Here's my $.02 on the Detroit automakers:

Managements at all three that are now long gone screwed up by not thinking about the long-term costs of the generous retirement, medical and furlough benefits they negotiated with the UAW. they bought labor peace and pushed the problems out by a couple of decades.

The UAW screwed up equally badly by not thinking about the long-term consequences of the great contracts they negotiated in the 1970s. You cannot squeeze blood out of a turnip.

Detroit gave American consumers what they asked for (big, powerful vehicles) but auto execs never gave a second thought to the bigger economic picture, including oil. The 1970s oil shocks should have been a warning. Detroit should have had skunkworks projects underway to build and sell fuel-efficient vehicles. Instead, John Dingell's objections to fuel efficiency standards helped bury them rather than protecting them.

Detroit squandered it's reputation and never figured out how to reclaim it. I don;t know what the composition of cars in the parking lots looks like today but at one point, the Detroit execs were complaining that too many of their employees had purchased cars with foreign badges. All by itself that should have been a wake up call.

Detroit's top execs make a lot of money by any standard, but the salaries of the 1,000 highest paid individuals at GM, Ford or Chrysler probably average in the range of $300-400k. At GM, the payroll for those folks amounts to less than 1% of GM's total expenses. If rank-and-file workers have to take a haircut, so should these folks, but cutting executive pay to zero is not going to have a material affect on the bottom line. On the other hand, perks like corporate jets and executive dining rooms should have gone a long time ago.

It's very rare that any one individual is responsible for a catastrophe like this. IMHO labor and management share the blame and it's going to take labor and management to fix the problem.

[Rand]

Bring back the guillotine. A good start would be the boards of directors for the fortune 1000.

[crokett]

I'm also talking about the 'VP of Best Practices' that makes $500K a year to make extra non-value added work for others and who's work output is mainly powerpoint presentations. Anyone else who's worked at a couple Fortune 500 companies knows what I mean.

I work for a Fortune 500. In my job I talk to my senior execs more often than I would like. Beileve me, if one of the problems I am working on reaches the exec level it is a BAD thing.

[prlundberg]

AFIK Honda and Toyota aren't hemorrhaging cash or asking for bailouts. Honda just opened a plant in Indiana this week. The Big 3 execs have run their respective companies into the ground. They have been teetering on the edge for years. The current economy is just the final push. This link was posted in another thread on this site but it is a perfect example of what is endemic to the US auto industry:

http://www.detnews.com/2005/autosins...A01-351179.htm

Well, offhand I don't know about GM and Chrysler, but Ford actually did get it turned around and pulled a profit in the 1st quarter of this year.

I don't think Honda and Toyota are making money right now either. Both have gotten heavy subsidies from the Japanese government in the past.

[gjat]

As stupid and disrespectful the way the top execs get paid and spend money, the amount of money relative to what's churning each year is minor. What is demonstrated is how they live in a different world and have little or no need to resolve long term issues and problems. Hiring the exec from H.D. is stupid.

It is/was the short term greed of stockholders, executives, AND the UAW that is killing the Big Three. Giving them bailout money isn't going to force any of them to face reality and do what's right for the long term, not what's right for just their immediate benifit. I have no idea how to resolve their issues, but just giving them money is certainly not what's going to help.

How do you resolve the issue of UAW benifits that they were promised? How were they to be funded? What happened to the money set aside? If they were to be funded on future revenues, what guarentees were there if Ford or GM were to go out of business?

How do you reslove the issue of stockholders that expect and need a return on their investments? Many of us have money in 401k's, mutual funds, etc., and expect it to fund our retirement.

How do you resolve the issue of execs who are responsible for a company churning 150 Billion dollars in business a year? How do you set up realistic goals or incentives that satisfy stock holders, UAW, and long term goals of the economy?

Imagine how an exec can realistically balance a decision on how many billions to invest in electric cars 5 years ago when they're makeing huge profits on SUV's that is funding UAW benefits and dividends to teachers with GM stock? It's easy to decide now it was worth it, but 5 years ago, nobody really thought gas would spike for a few months. ****, gas is now less than $2 a gallon. Is it really reasonable to be investing billions in small eco-cars and expect people to be buying them two years from now?

[Uncle Cracker]

Some are equating the bank bailout with the auto bailout. I'm not smart enough to discern the difference, although I know there is one... What does give me pause is this: If the government can seize failing banks to right the ship and prevent financial collapse, why is there not a mechanism by which this can be done to the automakers? It seems the imminent economic consequences are the same for either industry. Is it because the bank bailout benefits more white-collars, while the auto bailout helps more blue-collars? Somebody 'splain it to me...

[LCHIEN]

Some are equating the bank bailout with the auto bailout. I'm not smart enough to discern the difference, although I know there is one... What does give me pause is this: If the government can seize failing banks to right the ship and prevent financial collapse, why is there not a mechanism by which this can be done to the automakers? It seems the imminent economic consequences are the same for either industry. Is it because the bank bailout benefits more white-collars, while the auto bailout helps more blue-collars? Somebody 'splain it to me...

Well what makes one think that the government would have any more success at running a carmaker than anything else it has screwed up?

And, a good question is, if the banks got 700 billion to help expedite loans to businesses, why aren't the automakers going to those banks for loans?

And I think that yes, as someone pointed out, the automakers problems go back years... the overly generous contracts with the unions are now saddling every car with $1000's of dollars of entitlements. Also their (probably stock market-induced) dependence on short term profits made them short sighted with respect to mix of models (mostly SUVs and big pick-up trucks and weak hybrid and economy offerings). Now they are struggling to acquire the technology for hybrids and EVs.

Finally, anyone who can-not see higher fuel prices coming back eventually is dreaming. Costs and risks of exploration are increasing, oil producing countries are becoming more belligerent and the whole system -production and refining - is so weak. A disaster, natural or terrorist or military, on a few major production platforms in the Gulf of mexico for example would take years to repair (It took over a year and a billion dollars to repair a single platform in the Gulf that produces 15-20% of the Gulf output, after Katrina)

[Uncle Cracker]

Well what makes one think that the government would have any more success at running a carmaker than anything else it has screwed up?

I don't know that it would, but at least when the government takes over a bank, they take it, lock-stock-and-barrel. This auto bailout thing leaves the auto execs in charge. It's just giving money away, without gaining any control.

[LinuxRandal]

Detroit gave American consumers what they asked for (big, powerful vehicles) but auto execs never gave a second thought to the bigger economic picture, including oil. The 1970s oil shocks should have been a warning. Detroit should have had skunkworks projects underway to build and sell fuel-efficient vehicles. Instead, John Dingell's objections to fuel efficiency standards helped bury them rather than protecting them.

I am going to have to disagree on that issue. Detroit started making more large vehicles as demand increased, yes, but then they dropped compact/subcompact, fuel efficient entry level cars pretty much completely (recently returned with the Aveo). Took the few small cars they had left (that were getting the same mileage as much larger vehicles), and tried to make them sportier (cost more). As people didn't have the more fuel efficient and less expensive vehicles, a lot of people foolishly took out loans they shouldn't have, and choose the larger vehicles (since same gas mileage, safer, etc).

I've been asking for YEARS, for another small fuel efficient vehicle, that is small (easily parkable), inexpensive, (a freakin starter car shouldn't be $20k), and gets 32mpg or better IN TOWN (stop this highway advertising crp).

I do agree they should have been watching their own parking lots, since all the (opinion) had to do, was look out their boardroom windows. They don't listen to us about their paychecks, you think they would listen to us about what we want? They try to INVENT the market they want, then sell to it.


I also want to know more about how these GLOBAL corporations, who are making money in other countries, are not able to help support one another (corporate support from their other continent parts)? Maybe they could bring someone in from them.

[radhak]

This WSJ article Just Say No to Detroit says the three should be allowed to crumble and die. Seems GM and Ford burnt up $110 billion between 1980-1990, and $465 billion in the last decade.

Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

While I can empathize with mistakes and shortsightedness, I cannot understand how they are unable to emulate Honda/Toyota after seeing these companies succeed where they (big three) themselves failed?

btw, a side note : WSJ seems to have finally acted on their promise and opened up quite a bit of their content to non-subscribers ...

[smorris]

I work for a Fortune 500. In my job I talk to my senior execs more often than I would like. Believe me, if one of the problems I am working on reaches the exec level it is a BAD thing.

QFT!

Taking a problem to the exec level is often an exercise in pain for everybody involved.

[JR]

On the topic of exec. compensation, here is an interesting chart from the AFL-CIO site (please take note of the obvious bias). IMHO, worker to executive pay ratio is the key metric we should be concerned about. If executive compensation is organized such that working stiffs get stiffed, we'll all go to heck in a handbasket.



Also, while not defending all the negotiated terms of UAW contracts, the frequently-mentioned retirement and medical benefits require further explanation, IMHO. It is presumed those benefits are a key reason American mfrs. are uncompetitive, which may be true. OTOH, foreign workers get retirment and health benefits provided by the state.

If UAW workers give up these benefits, how will they get the care they need when they are old or sick?

JR

[jackellis]

If UAW workers give up these benefits, how will they get the care they need when they are old or sick?

My opinion, of course, but depending on someone else to make sure you have a comfortable retirement is probably not wise. It was obvious to me 30 years ago when I first entered the work force and it has become even move obvious over time. Social Security and company-sponsored retirement plans should supplement other savings, not be a substitute for them.

I am going to have to disagree on that issue.

I'm a little confused. The balance of your post seems to agree with what I said. Not trying to start an argument. Just trying to understand.

Finally, anyone who can-not see higher fuel prices coming back eventually is dreaming. Costs and risks of exploration are increasing, oil producing countries are becoming more belligerent and the whole system -production and refining - is so weak.

Yep. My wallet is pleased that prices have dropped, but I know it's not going to last. Ain't no more gushers or oil seeps. No more poking a hole in the ground with a stick and out comes oil. Finding, extracting and transporting oil is getting more expensive by the day.

[OpaDC]

Having worked for the welfare department before, I can say this happens at all levels. Always p***ed me off to see people driving up for food stamps and their welfare checks in new Caddy's, Lincolns, BMW's, etc. And I'm not talking about just the occasional person either. Kind of the same thing.