Over the past few months we’ve read endless arguments as to the wisdom, morality and necessity of allowing two out of our three major auto manufactures to go bankrupt.
In the end, both Chrysler and General Motors claimed that they simply couldn’t continue under the backbreaking load of promises they had made over the years. Even when the federal government bailed them out repeatedly, they still couldn’t make the nut they owed to stockholders, bondholders, current and former workers, suppliers and dealers.
So they bid them all a fond adieu and sought the protection of the courts, which, after a brief (24 hours maybe? 48?) session of deep consideration and fervent hand-wringing, wiped their books clean.
If you or I were to do this, there would be a certain amount of shame and pain involved. We would be forced to give up assets and meet certain commitments going forward. We would most probably have difficulty borrowing in the future. (Who, after all, could possibly trust us?) And we would certainly feel the disapprobation of the community at large.
GM and Chrysler suffer from none of this. They will not be punished or shamed in any significant fashion. And, most likely, the “new” companies that sport the same names will have no problem whatsoever borrowing additional capital or selling shares. Heck, their credit ratings will in all probability rise dramatically, since they now have virtually no overhang.
I know, I know. Corporations are soulless non-entities, mere bookkeeping constructs that cannot feel pain or shame. But even their ostensible public faces, their CEOs who were forced to step down from their golden thrones, seem to have been allowed to keep most of the gold.
You Only Need a Golden Parachute if You Have Actually Left the Plane
I can’t speak to ex-Chrysler CEO Bob Nardelli’s package, as Chrysler’s private owner, Cerberus, is under little obligation to reveal it to us. But I do know that Nardelli was run out of his previous position at Home Depot (HD:NYSE) over issues of scandalously high compensation, at a company he had for all practical purposes driven into the ground. In the end, I suspect he’s done all right for himself.
As for ex-GM CEO Rick Wagoner, SEC documents reveal that he is actually still retained by GM as a “consultant”… is slated to get $1.64 million in benefits annually for each of the next five years, plus an annual pension of $74,030 for the rest of his life… and may cash out his company-provided life insurance policy for an additional $2.6 million.
Be that as it may, done is done, and the two behemoths have moved fairly smoothly through the bankruptcy procedure, shedding debt, guilt and obligation along the way.
Done, Finished, Over…
Several “interested parties” protested to any who might offer remedy that they were getting inordinately screwed. Bondholders getting pennies on the dollar… car owners who lost limbs and loved ones, whose court cases were simply stopped in mid-testimony… unilaterally dismissed dealership owners who received naught for their franchise licenses… all were told that this was the cost of doing business in America.
“It’s done. Go home!”
But this is America, the land of the eternal second act. And just as these companies are being reborn, and these CEOs will be rehired, the auto dealers who were forcibly put out of the game have found hope from one last court of last resort.
“Was it over when the Germans bombed Pearl Harbor?…”
Now, there’s something you have to understand about a middle-American new car dealer. Maybe he’s not a “Master of the Universe” or such – no major player on the grand stage with three or four senators’ home phone numbers on his speed dial. He has no K-Street lobbyist looking out for his personal hash, and has probably never dined at the White House.
But back in his hometown, he’s a pillar of the community: a major employer and lender, a senior member of the local lodge, the friend of mayors, alderman… and most certainly a regular contributor to his congressmen’s re-election fund.
And so we get the latest chapter in the grand story of GM and Chrysler’s bankruptcy: Steve LaTourette (R, Ohio) has snuck an amendment into the just-passed (219 to 208) House spending bill that forces General Motors and Chrysler to restore its abrogated dealer franchise agreements.
“… It’s not over until we say it is!”
How might such a thing happen, when most every other aggrieved party was told by such heavy hitters as the White House and the Supreme Court to “pound sand?”
House Appropriations Committee Chairman David Obey (D, Wis.) pointed to a dealer in his district “who runs a good business.” As Mr. Obey puts it, “I do not for the life of me understand why he would be knocked off.”
As Speaker of the House Tip O’Neill used to say of Washington, “All politics is local.” Now that the sprawling schizophrenic entity that is Washington owns GM, most every local Panjandrum has been gifted with the ability to determine exactly how GM goes about its business.
Again, this is how they roll in Washington and Detroit. Or perhaps I should say, this is how they roll on and on and on, until we all roll to a shuddering halt.
Adam Lass is the editor of WaveStrength Options Weekly and contributor to Taipan Daily. He has written numerous articles and special investment reports for several major financial publications, including Taipan, Fleet Street Letter (US), Strategic Investment and Penny Stock Fortunes, on topics ranging from long-term market forecasting, crude oil pricing, and currency speculation to precious metals investing.
2008 Mercedes-Benz S550 #5533b in Plantation, FL 33317