On Sunday the rumblings began — Rick Wagoner was out at GM, and the Obama administration had requested it. There is no doubt in a free market, the best alternative for GM and any other company that can’t make it, is to fill Chapter 11 and reorganize. In my view, there is no such thing as “too big to fail.” Had we let the companies fail in the fall, we’d be months into a recovery instead of still teetering on the edge.
However, when is it appropriate for a CEO to be pushed out as a part of a government plan? I guess it is part of the Obama 5-year plan for business. You remember the old Soviet “5-Year Plans,” don’t you? And how well they worked?
Rick Wagoner is a now the poster boy of the Obama administration’s “effort” to save the auto giant. Where was the Board of Directors on this who repeatedly affirmed their support of Waggoner throughout the tumble of GM stock to $2.76 in premarket trading on Monday?
The complexion of the Obama economic team is of academics who move between university positions and government appointments and who have never really run a business. They are trying out theories as if they are professors who can change things any time they wish. So much for the two week bear market rally…it will be gone after today. The American people do not want to see their CEOs groveling at the feet of the government trying to win favor and bail-out money. I hate to say I told you so, but once you start taking money you didn’t earn and didn’t deserve and could borrow legitimately, it goes downhill fast. Whether you are a family of four or one of the largest corporations in America, you have to balance the books. Unless, of course, you are the federal government.
So President Obama will speak to the people to calm their fears on the auto market as he prepares to wing his way to Europe with a staff of 500 people, including a team of six doctors and a fleet of decoy helicopters. Give me a break: the spend and spend message of the Obama administration is already being rejected by Germany, where Chancellor Merkel has lead the assault to nix the idea put forth by President Obama and Prime Minister Brown for a “global new deal.” Sarkozy of France and the Spanish finance minister, Solbes, have passed on the idea of more spending. When these guys are against you and are talking about capitalism in stronger terms that the American president, we are in serious trouble.
What’s a new President of the United States to do? Announce the virtual takeover of the American auto manufacturing business and then leave town as the markets fall. Rick Wagoner spent 32 years with GM working all over the world and is stepping down immediately, the company said in a statement released Monday. Under the terms of the government loans GM has taken, he doesn’t even get an evil severance package, even though he’s been with GM throughout his entire adult life. Replacing him is another long term GM employee, Fritz Henderson. “The board has recognized for some time that the company’s restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience,” said Kent Kresa, GM board member.
One theory out there is that removing Wagoner will send a message to the unions that they needn’t deal because they risk losing absolutely nothing. No matter how much government takes over management, Obama will never demand real concessionis from the UAW. The dirty little secret is the current workers have given up quite a bit — it’s the “legacy” folks, the retirees, that are really putting a drag on the company. Those 100,000-plus retired workers want everything they were promised. I understand that feeling, but if the company goes bankrupt and reorganizes, or worse, goes away, then the retirees get nothing. Unless the government steps in, which Obama would.
I find it hard to believe the Obama administration would do anything that was anti-union. They believe what is wrong with America is there are not enough union members. They want a union in every shop in America. So what’s behind this? I believe they have no idea what they are doing. They have put Wagoner’s head on a stick because there is an anti-CEO sentiment out there. Somebody’s head had to roll, and Wagoner was it.
So far, the banking industry and Wall Street is still the problem. Could it be that the Obama administration is protecting an industry that donated heavily to his campaign? Nah, he was bringing change to politics — he’s not using lobbyists, and he’s looking for a new post-partisan way of doing things…If you believe that, then you voted for Obama.
Wagoner is the sacrificial lamb of the failed bailout of Detroit, but he is also the beginning of what is to come — and Obama-run business cycle. It won’t work, and we are not an experiment. We can’t create a new kind of capitalism as the President of France said last week. We need to land on free market principles and capitalism and let the chips fall where they may. No one is too big to fail, and that includes President Obama and his financial team.