Miken

GM's Tough Treatment Should Be a Model for Other Bailouts

Treatment of the auto companies vs the banks and Wall Street will never be the same for two reasons:

1. The auto companies are not part of the east coast elitists. They are primarily a mid west concern. If there's any doubt about that, simply look at the market share of the Detroit 3 on the east coast. Even in the face of irrefutable data on quality, market share has not grown. It's simply not cool to drive a domestic car. For proof of that, I can provide a link that shows what the Auto Task Force members are driving for their personal cars.

2. You have to follow the money. I can also provide a link showing how much money the financial services industry has given to congressmen, senators, and Presidents.

So, to expect that there will be similar treatment is not likely.

Why GM's Wagoner and Not BofA's Lewis?

Whenever a company can no longer function on its own, consideration must be given to appropriate action...by the BOD. That does not include interference from the government. It also doesn't include organizations that were forced to take TARP funds that didn't need them. The logic of giving taxpayer funds to companies that don't need them truly escapes me.

Having said that, we all know that companies that make things take a subservient position position to companies that shuffle around other people's money. So, this whole scenario was predictable.

Sure, the GSE and AIG CEO's were removed, but I think that is a different case. My thought is they should be treated like the Enron thieves along with those on the Senate and House Banking Committees that enabled the criminal activity.

Many have criticized the automakers for coming to the first hearings unprepared. Their only frame of reference was the handouts for the Wall Street and banking companies that got money whether they needed it or not.

The real answer for the different treatment lies in the amounts of money donated by the financial services sector vs the manufacturing sector.

How Bailouts Are Messing with Capitalism

As I am writing this, apparently the Obama administration has decided that the CEO of GM should be terminated. I agree that someone should be terminated, however, their zip code should be between 20001-20599. Please see reasons 1,2,3 below.

Actually, I thought that was the job of the BOD and shareholders.

If this makes them feel better, so be it.

Who is John Galt?


On Mar 29 09:49 AM Miken wrote:

> With regard to the auto companies, I believe that everyone is overlooking
> the fundamental issues. I don't think there is any doubt that the
> current Wall Street fiasco has damaged the ability of the American
> based, and even foreign based companies to survive. But even before
> the Wall Street mismanagement, the American companies were in a state
> of decline. The central question should be why the American companies?
>
>
> I don't think the simplistic answer is management or unions. I believe
> the simple answer is a view of the people running the country, and
> those on both coasts that a healthy manufacturing sector is passe
> and not important. The reasons I have drawn that conclusion are
> the following:
>
> 1. There is no articulated industrial policy. What do we think a
> manufacturing base should look like? What are the policies that
> should shape our industrial policy? Have we developed the infra
> structure to support our vision? There apparently is no appetite
> in Washington, or anywhere else in the country to have a dialogue
> on this.
>
> There certainly is in countries that are emerging as the new manufacturing
> base in the world order. In countries such as China, Mexico, South
> Korea, Japan, Thailand, etc. there is a very clear priority given
> to the manufacturing sector because they recognize the economic value
> stream connected with making things.
>
> 2. More fundamentally, is a manufacturing base important? Or should
> the country try to exist on retailers, services, and shuffling other
> people's money around (Wall Street)? I don't think so. See the
> value stream discussion in item 1.
>
> 3. What is our energy policy? The beginning of the current crisis
> for the American based auto companies was the sudden spike in gasoline
> prices because we have continued to let ourselves vulnerable to foreign
> despots and royal families whims to control energy prices. At $1.50
> per gallon, customer preferences are significantly different than
> at $4.50 per gallon. Were the American companies asleep at the wheel,
> or were they better at building larger cars and trucks than the foreign
> companies? Were they callous or were they giving the customers what
> they wanted? The evidence suggests the latter. Toyota, Honda, Nissan,
> BMW etc. all where trying desperately to break into the truck market
> without much success.
>
> When our foreign dependence allowed a drastic change in energy costs,
> not only were the American companies caught off guard, but others,
> especially Toyota was closing plants delaying start ups, etc.
>
> I don't care if prices are high or low, the auto companies can exist
> in either scenario. When Washington decides to address this, it
> will help them develop better strategies. After all, most of the
> American companies have world wide operations that were doing just
> fine making small economical cars using a variety of fuels from CNG
> to ethanol.
>
> Too long for a post, sorry, but I don't buy the simplistic answers
> to the question, "what's wrong with Ameican companies?".

How Bailouts Are Messing with Capitalism

With regard to the auto companies, I believe that everyone is overlooking the fundamental issues. I don't think there is any doubt that the current Wall Street fiasco has damaged the ability of the American based, and even foreign based companies to survive. But even before the Wall Street mismanagement, the American companies were in a state of decline. The central question should be why the American companies?

I don't think the simplistic answer is management or unions. I believe the simple answer is a view of the people running the country, and those on both coasts that a healthy manufacturing sector is passe and not important. The reasons I have drawn that conclusion are the following:

1. There is no articulated industrial policy. What do we think a manufacturing base should look like? What are the policies that should shape our industrial policy? Have we developed the infra structure to support our vision? There apparently is no appetite in Washington, or anywhere else in the country to have a dialogue on this.

There certainly is in countries that are emerging as the new manufacturing base in the world order. In countries such as China, Mexico, South Korea, Japan, Thailand, etc. there is a very clear priority given to the manufacturing sector because they recognize the economic value stream connected with making things.

2. More fundamentally, is a manufacturing base important? Or should the country try to exist on retailers, services, and shuffling other people's money around (Wall Street)? I don't think so. See the value stream discussion in item 1.

3. What is our energy policy? The beginning of the current crisis for the American based auto companies was the sudden spike in gasoline prices because we have continued to let ourselves vulnerable to foreign despots and royal families whims to control energy prices. At $1.50 per gallon, customer preferences are significantly different than at $4.50 per gallon. Were the American companies asleep at the wheel, or were they better at building larger cars and trucks than the foreign companies? Were they callous or were they giving the customers what they wanted? The evidence suggests the latter. Toyota, Honda, Nissan, BMW etc. all where trying desperately to break into the truck market without much success.

When our foreign dependence allowed a drastic change in energy costs, not only were the American companies caught off guard, but others, especially Toyota was closing plants delaying start ups, etc.

I don't care if prices are high or low, the auto companies can exist in either scenario. When Washington decides to address this, it will help them develop better strategies. After all, most of the American companies have world wide operations that were doing just fine making small economical cars using a variety of fuels from CNG to ethanol.

Too long for a post, sorry, but I don't buy the simplistic answers to the question, "what's wrong with Ameican companies?".

New Candidates for the Dow Jones Average

This writer is typical of the American government and Americans in general. Today the DJIA has very little representation from the manufacturing sector. I don't care if it's GM, I doubt that they care either. The author has not recommended one manufacturing company to replace GM. It's as if the country has only banks, entertainment, and software companies.

But the DJIA is supposed to a representation of the economic health of the markets, the manufacturing sector is quickly disappearing and the suggestion is that we ignore it completely in the Dow. If we can't see the problem, maybe it doesn't exist. Show me a country without a strong manufacturing sector, and I'll show you a third rate country.

Why Capping Pay Is Likely to Work

It occurs to me that the biggest losers are skating scott free here. Sure GM is $50 billion in debt and needed a loan. But that's only because they don't have the ability to print more money.

How about the organization that is $11TRILLION in debt? Why don't we take away their executive air fleet? Why don't we limit their compensation and benefit package? After all, they have received a bailout from the taxpayers already. Are we thinking that the government will cease to attract the highly qualified people that are there now...don't make me laugh. The organization that has demonstrated a total lack of fiscal skill is making rules for everybody else.

Am I the only one that finds that odd?