By Cliff Montgomery – Apr. 23rd, 2009
Top executives at Chrysler Financial spurned a much-needed government loan because they couldn’t bringthemselves to accept its conditional pay limits, stated a study released Tuesday by the federal bailout’s specialinspector general.
The U.S. government earlier this month had offered Chrysler Financial a $750 million loan as part of the federaleffort to keep alive America’s struggling auto industry. Top officials instead purposely went forward with a moreexpensive financing plan from private banks which only adds to the company’s already staggering financialburden, according to a Washington Post article published Tuesday.
The “Big Three” automakers–Chrysler, General Motors and Ford–are fighting to avoid bankruptcy. ChryslerFinancial is a leading lender to Chrysler customers and dealerships.
Chrysler Financial of course denied the findings of the special inspector general, feebly claiming that thecompany spurned the loan simply because it was no longer needed.
But that claim is torn to pieces by the very fact that the firm sought funding elsewhere–and accepted anagreement with far less generous terms, if the Post article is correct.
The executives’ refusal to accept a simple, even necessary, pay cut “was certainly a deal-breaker fromTreasury’s perspective,” Neil Barofsky, the Treasury Department’s special inspector general, proclaimed duringa discussion last week with the bailout program’s top compliance officer.
To be fair, “Chrysler and Chrysler Financial are [technically] separate companies,” according to the Post.
“But both are owned largely by Cerberus, a private-equity firm. The German automaker Daimler owns a 20percent stake in each.”
In any case, the executives at Chrysler Financial aren’t the only ones still refusing to live within their means.
“General Motors Corp., surviving on $13.4 billion in government aid, spent $2.8 million on lobbying during thefirst three months of 2009,” stated Bloomberg News on Apr. 21st. Bloomberg’s information came fromfinancial disclosures filed Monday with the U.S. House and Senate.
The obvious matter here? America’s top auto execs and shareholders still are more concerned with theirprivate greed than the public need. And they don’t much care how many salary cuts their workers have totake–or how many taxpayer dollars come out of your pocket–to keep their perks and their massive paychecks,which they clearly haven’t earned.
To a great extent, the utter incompetence of “Big Three” executives and shareholders during America’sfinancial meltdown has made the Great Recession particularly harsh in Detroit. Last month an exasperatedObama Administration forced out the General Motors chairman and declared that neither Chrysler nor GM hadsubmitted a satisfactory plan to receive more federal bailout money.
The White House then gave Chrysler and GM one month and two months, respectively, to get their financialmatters in order. If they do no do so, the administration plans to step aside and let the auto giants fail.
That’s an understandable feeling, but the U.S. auto industry simply is too large an employer to fail. Such anend would almost certainly throw the American economy into another Great Depression.
We believe something both more realistic and more audacious needs to be done.
Bold times demand bold measures. The incompetent executives and greedy shareholders who destroyedAmerican business need to understand that they can be replaced, especially when they perform poorly. Andthis may be done in a way which sends the biggest possible message to them all.
Acting on national interest, the federal government may seize all auto industry assets and turn over fullownership of the struggling companies to the workers who actually build American cars and trucks.
The Detroit auto workers are the ones who actually make and design the vehicles. And just last December, wesaw that these workers were the ones who quickly made concessions to keep the companies afloat.
The workers do all the work and, in tough times, assume all the risk. Thus it’s only right that they receive allbenefits in times of plenty. Successful cooperatives throughout America prove that when given a chance, U.S.workers can run a massive modern business all by themselves. And they almost certainly can run the “BigThree” more competently then the executives and shareholders whose misrule has brought the companies tothe very edge of ruin.
That’s the kind of boldness which will finally get the attention of the business world–and achieve results.
