And I don't like to mix politics with business on this blog.
But this weekend's firing of GM CEO Wagoner by the head of one of the firm's creditor's, the US federal government, breaks new ground. So I believe it needs to be addressed.The accompanying price chart for GM and the S&P500 Index since 1962 paints a very sobering picture for the auto maker. In non-deflated dollars, the company's stock price peaked in 2000, but, in real terms, obviously much, much earlier.
Since Wagoner's assumption of the CEO title, GM's market value has headed straight downhill.
I've railed for years against GM's horrible senior management and ineffectual board of directors. I have argued for years that Wagoner should go.
But not because the president of the US, which is not even the largest creditor of the company, says so.
However, even Wagoner's dismissal by a minor creditor, is not the most troubling news related to GM today.
No, that would be the US president's contentions, as expressed in his remarks about GM this morning. It's evidently too recent to find a YouTube clip of the appearance, so my text will have to suffice.
Disturbingly, the president of our country unilaterally declared that:
-GM is too old and important to fail.
-Management is to blame, but workers are not.
-Federal money will be spent to save/create auto jobs in the communities affected by GM's troubles.
-GM will not be put through a normal Chapter 11 bankruptcy.
-After being 'fixed,' GM will rise to success once again.
No mention was made of the UAW's role in this through its exorbitant demands. Nor was Ron Gettelfinger's resignation as head of the UAW demanded by our government.
Further, our president, oddly for an attorney, provided evidence of his ignorance of what a Chapter 11 filing entails. He claimed that such a filing would result in dissolution of GM and the sale of its operations, which would also shut down.
This is simply false.
So now we have an ultimate government taking. At least with AIG, the federal government became the owner of the firm, albeit at gunpoint, and has since called the shots.
At GM, it's not an owner, but a relatively minor creditor. And should have no particular stake in the outcome of the firm. Markets are supposed to do that.
Instead, we have a near-Rooseveltian step by government into the restructuring of the auto sector. Chrysler was judged unworthy of further investment, unless it completes its pending merger with Fiat. GM has been deemed worthy of saving, but, obviously, because of the UAW jobs involved.
And those jobs, and the contracts under which they exist, will not be subject to a court-appointed bankruptcy trustee. No, the government has charged management alone with guilt in GM's failures.
The nature and extent of the federal government seizure of control of GM, using a comparatively small operating loan as the basis for its thuggery, is disturbing.
But perhaps this could have been avoided if, as I wrote half-jokingly, this post were true. Had Armando Codina been replaced by a competent board member, along with most of the rest of GM's board, perhaps this act of government seizure could have been avoided.
My business partner and I have discussed my strong belief in the necessary of death of corporations which cease to serve shareholders well. It is, admittedly, a very robust version of Schumpeterian dynamics. But this latest act in the melodrama that is GM proves my point.
Far better for the private sector to look after its own interests, shutting weak, ailing firms, than to await politically-motivated government meddling.
GM could have gone quietly, with some parts sold, others closed. Now, it's going to be forced to continue life as a money-losing "green" car maker, taking orders from Washington.
Truly, a far more ignominious end for the once-proud and profitable car maker.
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