US Auto Companies Need to do the Right Thing… Go Bankrupt

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.

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2 responses to “US Auto Companies Need to do the Right Thing… Go Bankrupt

  1. Ok after a much needed break from the election, it is time for my .o2 cents once again.

    The bailout has become a joke. American Express (last I checked was not in the mortgage biz) has converted to a bank holding company to get its hands on almost $4B TARP money. They don’t need a bailout. Their business does not drive the US economy.

    It is utter BS for a Goldman et al to say that the $13B bonus money they are paying out is not coming from TARP. You and I are expected to liquidate all our assets to pay our bills – including 401Ks. If Goldman has $13B then it ought to pay back the money it took from us taxpayers.

    This whole thing is starting to have the stench of Wall Street all over it. Hmmmm I guess it is just a conicidence that forner Wall Street executives are administering it.

    I have also read that TARP money is being used by Bank of America, Citi and others to acquire smaller banks. How does that solve the problem

    Credit has not loosened up. The taxpayer is getting royally screwed here and who is going to step up to the plate and put a stop to this nonsense?

    Where is the TARP line? -I want to stand in it to get my share of free money.

  2. Pingback: “General Motors Shuts Its Doors” « The Official Blog of PoliTalk - The Weekly Political Podcast

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