Don’t get me wrong, it will be painful, but it is necessary. It is the only way for any of the companies to survive long term. Essentially, the big three are not economically viable. By giving them more taxpayer dollars, we only pro-long the inevitable. The only chance any of these companies have is to file for bankrupcy and restructure their debt and cost structure. Management, shareholders and unions will all take a hit, but that is the way the cookie crumbles. If they couldn’t survive an economic downturn without taxpayer loans, they shouldn’t be propped up with government loans.
Despite huge losses in 2007, top executives at these companies did quite well. GM had a $39 billion loss and Ford had a $2.7 billion loss. So what did executives get for these losses? Well, let’s say they did ok. According to a Reuters article:
- GM CEO Rick Wagoner’s salary and other compensation rose 64 percent in 2007 to about $15.7 million with a base salary of $2.2 Million
- GM President & COO made about $9.3 million in 2007, up from about $5.1 million in 2006 with a base salary of $1.8 million.
- GM Vice Chairman Bob Lutz’s compensation rose to about $9 million in 2007, from about $5.1 million in 2006. His salary was raised to $1.75 million, from $1.3 million.
- Ford CEO Alan Mulally had earned more than $22 million in 2007
I don’t have a problem with executive pay. However, giving the same executives another $25 billion on top of the $25 billion that was already granted to them doesn’t bode well for the taxpayer. How does keeping afloat a sinking ship benefit taxpayers? Why don’t the executives want to do the right thing? It is because when they file for bankruptcy, they can say good bye to their lofty compensation that they received despite record losses.
It’s time to let market forces cleanse the US Auto Industry.