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Big 3 Stooges

We have a new president-elect and signs of hope are everywhere, from celebrations in the streets of urban America at the prospect of the first clinically-sane president in eight years, to the victory laps of homophobic suburbia over gay rights rollbacks.  Things are looking so hopeful that, even on the brink of the biggest failure in U.S. business history, leaders of the Big 3 auto industry flew to the nation’s capital this week -- on individual private jets – to appear before Congress seeking $25 billion to tide them over till payday.  (Approximate cost of 3 private jet trips: $60,000.00.  Cost of a round trip commercial airline ticket from Detroit to Washington, DC: about 500 bucks.  Irony: Priceless!)

Together, the CEOs of General Motors, Ford and Chrysler have presided over the biggest business disaster since Enron decided to market New Coke under the name “Edsel.”  In the first half of 2008, the Big 3 lost a combined $28.6 billion dollars, continuing a trend as consistent as Amy Winehouse’s downward spiral:  FORD has lost more than 75% of its stock value under the expert guidance of CEO Alan Mullally, who rode to the rescue of the ailing auto company in August of 2006, “earning” $28 million dollars for 4 months of work.  When Rick Waggoner assumed the reigns of General Motors in 2001, its stock was trading in the 60s, and as high as $94 per share. Today, you can buy GM for under 3 bucks a share, its lowest level since World War II when, if you believe old people with spotty memories, things were pretty crummy.

By most estimates, Chrysler has lost at least $2 billion in two years -- making Chrysler the fair-haired sibling of these rotten kids.  But as a privately-held company since August of 2007, Chrysler isn’t required to divulge earnings, profit, loss or, luckily for CEO Robert Nardelli, executive compensation.  Nardelli will only cop to $1 in yearly “salary” but refuses to discuss “other compensation,” which history tells us is the lion’s share of executive recompense, like what a Vegas hooker can steal from your hotel room before you wake up.  (Nardelli’s own history suggests he’ll be looking out for himself:  after presiding over a 40% loss in the company’s value, the “disgraced” former CEO of Home Depot was dismissed in 2007 after earning $38 million the year before -- and handed an additional $210 million in severance to cushion the landing.)  

So naturally these CEOs, in reaching out for unprecedented government assistance after enriching themselves with combined salaries in the hundreds of millions of dollars, have assumed full responsibility for their Titanic-level failure, and even offered to step down and cede control to more responsible stewardship… like, say, drunken monkeys?  Right?  Um, no.

In fact, across a variety of media outlets, the blame for the failure of the U.S. Auto industry has been steered away from the bone-headed strategic decisions made by these captains of industry and laid right where it belongs: on wasteful union extravagances, like a living wage, basic health care and meager pensions.  We’ve been told “some” UAW workers earn more than $70 an hour and that UAW bosses make “extravagant salaries.”  Look for the union label, it’s made of spun gold!

As it turns out, that $70 per hour figure is inflated to include health and pension benefits – and the healthcare and retirement costs of all retired workers.  In fact, the average union assembly line worker makes about $28 per hour… and those “extravagant UAW salaries”?  UAW President Ron Gettelfinger earned a base salary of $145,126 for 2006.  The union’s officers combined made $2.9 million in 2006.  That’s lunch money for America’s corporate CEOs… after which, for effect, they will drink your milk shake!

And 70 bucks an hour – however inflated to inspire a sense of outrage in the little guy at home watching his about-to-be-obsolete analog TV – is a pittance compared to the $622,000 average annual salary of a Goldman Sachs employee in the year the company ran up record profits on dubious investments that have since collapsed, taking the banking, housing, automotive and milk shake markets with it... or, for that matter, our indignant public servants (even excluding pay to retired or dead Senators, and additional compensation like free health care, life insurance, full pensions, and office expenses ranging from $2 million and up, a Congressperson’s salary is currently $169,300).  Toss in the compensation of our our apoplectic news anchors (Bill O’Reilly recently re-upped at FOX News for $10 million a year, or roughly ten bucks for every time he makes you want to vomit), and our collective hysteria over the amateurish greed of union thousand-aires seems a little silly.

But regardless of troublesome true facts, the table has been set for more union givebacks, and even the very real possibility of allowing one of the Big 3 to fail as a way to dismantle the impotent remains of a formerly-virile union that once knocked up a working class with low self esteem into a radiant middle class.  And what will management give back?  The joke is, that a guy who was paid a quarter of a billion dollars over the course of one year, like Nardelli, could in fact subsist on a $1 annual salary.  For many, many lifetimes.  And Waggoner, who negotiated a retirement package of $4.6 million dollars per year even in the event of bankruptcy, could similarly stand to forego some of the excessive compensation “owed” him, if not exactly “due.”

But of course they won’t.  And don’t count on our easily-outraged national media, or equally purple-faced representatives in Congress, to shift accountability away from a suspect target – unions – toward the three guys who think private jets are the only way to fly.

It's a lot to ask for prudent decision-making at the top... at least until the drunken monkeys take over. 

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A Modest Proposal for a film by Kurt Engfehr and Ken Pisani.
2006 Ken Pisani and Kurt Engfehr.  All rights reserved.
All "Blogging Poorly" posts  Ken Pisani.