In asking for the resignation of General Motor’s Chief Executive Officer, Rick Wagoner, was the Obama Administration acting boldly?
In a word – yes. It is extremely important, for legitimate and serious reasons, that the Obama Administration holds chief executive officers accountable for their failed management of companies; companies that asked for government aid and/or served as a systemic risk to the well being of the nation’s economy.
Rick Wagoner was responsible and accountable for General Motors’ operations and the company’s resultant profitability or lack of it. General Motors must manufacture cars that people will buy, and equally important these cars must be manufactured in a cost efficient manner that will yield a profitable and sustainable company.
Now, did GM manufacture cars that people would buy and operate the company in a cost efficient manner?
The answer to the aforementioned question, I suggest, is a mixed bag with part of the answer not being the fault of GM’s management. Below the fold, we will take a look at a several issues that may make the "firing" of Rick Wagoner appear inequitable.
Below are three, but not all, of the most important issues that seem to impact the success of General Motors (and other American companies) but are not necessarily the fault of the managers.
The first and foremost issue that makes the "firing" of Wagoner appear suspect and unfair is the credit crisis that our nation is presently experiencing. General Motors seems to be a victim, like so many other Americans, of the current, bank-induced credit crisis. So, like other Americans, who are experiencing home foreclosures and credit card fatigue, GM is experiencing its own "foreclosures" and "credit card fatigue."
The second problem, and possible most onerous and dangerous one, involves the social contract issue; for example paying a livable wage, supporting a decent employee retirement plan and providing health care insurance for its employees. General Motors management is usually hammered for its "high" union wages and benefits. But is the alternative of low wages, and no retirement plan and health care insurance acceptable? I think not.
The third significant problem that has negatively influenced GM’s operations has been the subsidization of foreign automotive companies. The states, which have successfully induced foreign automotive companies to move to their states, provided immense subsidies to these companies. Subsidies for foreign automotive companies included property and corporate tax breaks, ad hoc laws, artificially created lower wages, and inadequate or non-existing retirement and health care benefits.
It is too bad that our government has not held the progenitors (e.g., banks, hedge funds, etc) of our current economic/financial crisis to the same accountability standards that it has required of the automotive industry.
Oh yes Virginia, you’re right; banks only have to mark their assets to "model" and not mark them to market like productive, main street companies must do.
Now I understand completely.