Monday, December 15, 2008

Is The Latest Wall Street Scheme Justice Overdue?

Hedge Fund Superhero and past chairman of the Nasdaq Stock Market, Bernard Madoff, has bilked his super rich investors out of approximately $52 billion. Many of those investors admit that they could never understand how Madoff's fund consistently paid such high returns but in spite of their concerns most of them still invested in the phony fund. W.C. Fields said, "you can't cheat an honest man" with excessive promises of profit. Mr. Madoff has certainly proved that you can cheat greedy men and it is high time that some of them paid for their greed instead of Main Street Americans. I find this act of Justice more than a little satisfying.

When AIG and some of the biggest banks failed, or were about to, Main Street bailed them out with no strings attached. Some of them continued to spend lavishly on themselves with that money and have as yet not used it as Treasury Secretary Paulson promised. Paulson demanded that the bail out money be given without conditions so the taxpayers can only hope that it will be spent properly. Greed is winning that one.

Now the automakers have come to Washington DC begging for a bail out. $15 billion won't be enough to save the poorly managed automakers; experts predict that it will take ten times that much or more. The Democrats want to give them the money to save two million workers from unemployment. The Republicans won't agree to giving them any money unless the union workers give up one-third of their wages and some of their retirement benefits; the Republicans think that union wages and benefits are the reasons why U.S. automakers can't compete with U.S.-based foreign automakers who employ only non-union workers.

I think the management of the U.S. automakers along with Congress, who backed off the gas mileage requirements, and American consumers who prefer big gas-guzzling SUVs are responsible for the failure of the U.S. automakers. It wasn't the union workers who decided that GM would sell a $72,000 Cadillac Escalade "Hybrid" that gets 19 miles per gallon of gasoline. It wasn't the union workers that designed cars of such poor quality that they are not as reliable as the cars produced in the U.S. by foreign automakers.

I don't think the union workers are responsible for the failure of the U.S. automakers although I do think they should contribute something to save the automakers. However, the GOP wants more than reasonable concessions for the union; they want to bust the automobile workers' union just like the GOP broke the textile workers' unions in the South in the 1930's.

I don't think Congress should bail out the automakers since I have no faith that their management would redirect their companies to manufacture competitive products. A bail out will only delay the inevitable failures and the massive unemployment that will follow. I'd rather see Congress investing in companies that are developing or have developed energy efficient automobiles and public projects to create effective mass transportation systems. The U.S. automakers only deserve to survive if they can do so on their own.


Kansas Bob said...

I mostly agree Joe.. leaders of these companies need to be responsible for their actions.

Unfortunately many of the decisions and actions of past leaders have put these companies in untenable situations.

Maybe they should have failed the last time the UAW was on strike?

Joe said...

I agree that the current management has inherited all the decisions and actions, good and bad, of their predecessors, but the current management has done nothing more than to follow the least cost path to the largest short term returns in spite of the future need for a totally different automobile. They had a choice and they made it - the wrong one. That choice had nothing to do with their agreement with the union. The lobbyists that convinced Congress to reduce the mpg requirements and to provide a tax incentive for purchasing SUVs were working for U.S. automakers not their union workers.

I spent 30 years working for a Fortune 100 company. GM management is not unique. They are, unfortunately, typical. Any manager who blames his failures on his employees is a liar.

Kansas Bob said...

I retired from AT&T after 27 years and heartily agree with your observations Joe!

ob9000 said...

Have a nice day, merry christmas & happy new year

karen said...

Well, hopefully and prayerfully, 2009 will start some healing. Happy New Year, Joe!!