Sunday, December 14, 2008

Aftermath Of The Senate's Defeat of Auto Maker Bailout Bill

On Friday of last week, with the news of the Senate's defeat of the Detroit auto maker bailout bill, a curious thing occurred.

GM prepared to file a Chapter 11 bankruptcy, as CEO Rick Wagoner declared that the company has insufficient cash with which to operate until a more assured rescue comes, after January 20.

Now, according to Forbes, Wagoner was paid $4.82MM in 2006.

Yet, for an assumedly similar amount this year and last, what did shareholders get?

A CEO so inept that he failed to file for bankruptcy, to reorganize GM, last year. So incompetent that he forced the firm to run through nearly all its cash before seeking court protection to reorganize and renegotiate any and all contracts- union, dealership, suppliers, etc.

Instead of behaving like a real CEO, and having his staff observe, then plan for contingencies stemming from the 2007 credit market troubles, Wagoner dithered on as usual.

Having now run GM almost entirely out of liquid assets, he baldly blames Republican Senators and the President for his firm's bankruptcy.

This is rich, indeed.

A better-run firm would have headed into the safe harbor of Chapter 11 last year, when the gathering clouds of financial crisis and debt market unraveling gave warning of trouble ahead.

No, not GM. Not Wagoner.

In their playbook, all troubles which GM has recently faced are due to Washington, or the credit markets, but none of their own making.

Not even from their sins of omission- failure to notice a crisis looming, and failure to seek Chapter 11 court protection, in which to sort out their mess.

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