In a startling departure, the Obama administration has decided that the price of failure in America should be failure.
While this principle has always applied to ordinary Americans, it did not apply to corporate America, where the price of failure has been bonuses and bailouts. Now, President Barack Obama has introduced something else: the boot.
Obama fired Rick Wagoner, the CEO of General Motors, on Friday simply because Wagoner was doing a terrible job and had run GM into the ground.
Wall Street was aghast.
On Monday, in a calm and forceful statement, Obama made clear his reasons. "Our auto industry," he said, "is not moving fast enough to succeed." In exchange for the billions in taxpayer funds some carmakers have already received and the billions more they want, President Obama is demanding "a better business plan."
The stock market plunged. Over the past couple of weeks, after the administration announced the injection of about $2 trillion in what was essentially free money into Wall Street, the market soared.
But now Obama is changing the rules! He is showing a different kind of audacity! He wants companies that get taxpayer dollars to perform as if they operated in the real world and not the Land of Oz.
In the real world, if you build a better car, people will buy it — and if you don’t, they won’t.
That has never been the operating principle in Detroit, where automakers made clunkers and the Japanese cleaned their clocks.
Wagoner is the guy who axed GM’s electric car program and decided SUVs would carry GM into the future. He has been the CEO since 2000, and GM has not shown a profit since 2004. In fact, it has lost $82 billion in that time.
GM’s stock was $70 a share when Wagoner took over and closed at $3.62 per share on Friday. But Michigan Gov. Jennifer Granholm, a Democrat, said Monday on NBC’s "Today" show that Wagoner was a "sacrificial lamb."
To me, it looks like the stockholders were the lambs. The lambs led to slaughter.
I feel bad for anybody who gets fired these days, and so I feel bad for Wagoner, though I suspect his golden parachute is large enough to land the space shuttle. His pension is reportedly bankruptcy-proof, and even though he agreed to accept a salary of $1 per year in 2009, he made $5.4 million in 2008 (the same year GM lost $30.9 billion) and $14.1 million in 2007.
And, of course, he had the obligatory private jet, though there is an upside and downside to having a private jet. The upside: You have a private jet. The downside: no frequent-flier miles.
Chrysler is also in big trouble, but Obama has given it 30 days to partner up with Fiat before he pulls the plug. Obama did not fire the head of Chrysler, apparently feeling that, unlike Wagoner, the head of Chrysler was not a complete doofus.
The problems of the auto industry are said to be complex: bloated union contracts, convoluted supplier agreements and a complicated dealership system.
But anybody who has bought a car over the past few decades knows the problem is really simple: Detroit needs to build cars that taxpayers actually want to buy instead of cars that taxpayers are forced to subsidize.
Do you know when Detroit will turn the corner? I do.
Detroit will turn the corner when you go to the rental car desk and the person behind the counter offers you a Toyota or a Buick, and you pick the Buick.
Wake me when that happens.