Wednesday, November 19, 2008

Four Pigs At The Trough: Auto CEOs & UAW Chief Beg For Government Rescue

Today, as I worked on various posts and equity/options management activities, I listened and watched the morning's entertainment. By that I mean the appearance of the Four Pigs from Detroit- CEOs Wagoner of GM, Mulally of Ford, Nardelli of Chrysler/Cerebrus, and Gettelfinger of the UAW.

Yes, even UAW chief Ron Gettelfinger has cheerfully pitched in. In a moment of pure deceit, Gettelfinger alleged that, failing a massive, immediate cash infusion by the government into GM, Ford and Chrysler, at least GM would be forced to file a Chapter 7 bankruptcy.

Gettelfinger's wrong. I checked online, and chapter 7 means, in effect, immediate liquidation. Nobody is suggesting that for GM.

Instead, a Chapter 11 reorganization is the logical alternative. Of course, in this scenario, Gettelfinger knows he's going to have to force his UAW members to swallow massive benefit cuts. And Gettelfinger's days as a powerful union boss will be shortened, as perhaps the largest remaining, old-line unionized sector in America takes a giant step closer to oblivion.

Among the more hilarious moments I saw before dashing off to a business meeting were these:

-Rick Wagoner fumbling for about five minutes, with no clear 'elevator pitch' reply to the question,

'Just how much money do you need? When are you going to run out of money now?'

Wagoner failed miserably to provide a clear, concise grasp of his own company's financial situation. If he were applying for a management job at the company he misleads, and provided such a response in a job interview, I'm sure he'd be rejected forthwith.

-A Democratic Congresswoman noting, while unable to pronounce the name of Cerebrus, and being obviously totally unaware of what it is or that it owns Chrysler, that by bailing the auto company out, Congress was essentially providing public financing to a private equity firm partially-owned by two vociferously free-markt Republican former-office holders; John Snow and Dan Quayle.

When Nardelli generously offered that Cerebrus would surrender 'all upside potential' in Chrysler, in exchange for this public bailout, he was tacitly admitting, as my partner agreed, that Cerebrus sees no hope whatsoever for any profit from its Chrysler deal. Thus, it is willing to surrender 100% of nothing, to get a percentage of the requested $25B 'loan.' A loan which only Wagoner, Mulally and Nardelli may actually believe will ever be repaid.

-Various Democratic Congress members reading from obviously-scripted statements provided to them by auto maker staffs, declaring that all sorts of catastrophe will befall the US if these three companies' awful management teams and too-richly-priced union workers are not given money immediately.

-A very articulate Republican Congressman from North Carolina asking why the three ailing, failing auto makers should be given aid, when, as he noted, picture by picture, so many of their cars are made in Canada, Mexico, and Germany. He then noted that the newly-elected President promised to deny tax credits to US companies which export jobs to other countries. How, then, he asked, could the US Congress, at the same time, give $25B to GM, Ford and Chrysler.

-A Congressman asking which, if any, of the testifying CEOs (and, one presumes, Gettelfinger) flew to Washington on commercial flights, would return on commercial flights, and would sell the company fleet of private jets. None volunteered in the affirmative.

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