Back in 1979 Chrysler asked for government assistance. The Chrysler Corp. Loan Guaranty Act required Chrysler’s creditors to accept 30 cents on the dollar paybacks and the U.S. government backed $1.2 billion in new Chrysler debt. This allowed Chrysler to issue bonds at a 10% interest rate, rather than the 14% that Ford had to pay for its debt. The bailout saved Chrysler.
As part of the deal, Lee Iacocca got his workers to take pay cuts and, for a year, he took a $1 salary and no bonus. After Chrysler paid back its debts, Iacocca rewarded himself; Chrysler ended its Salary Reduction Program in 1981 and executive salaries were restored to their 1979 level. Iacocca and his top executives also received retroactive payments in cash and stock to make up for the reduction in Chrysler’s stock price. In 1981, Iacocca made $360,000 [$857,714.85 in 2008 USD].
Yesterday, the CEO of GM and Ford indicated to the House Financial Services Committee that they would not be interested in reducing their salaries, like Iacocca did, to $1 in exchange for a bailout.
“I’m willing to do what I’ve been doing,” Wagoner, CEO of GM said, saying he has already accepted a significant wage decrease and given up other forms of compensation. He said he had previously cut his salary by 50 percent. But he stopped short of saying he would accept a $1 salary. His 2007 compensation was $15.7 million which includes the 50% cut. GM went through $6.9 billion in the 2nd Q this year.
Mulally, CEO of Ford said when asked if he would work for $1 a year, “I think I’m OK where I am.” Mulally also said, “I absolutely respect the intent of your question as a symbolic gesture,” adding, “but it is a symbolic gesture.” Last year Mullaly earned $21.7 million. Ford went through $7.7 billion in the 2nd Q this year.
As for Chrysler? Robert Nardelli, had said on Tuesday he would be wiling to work under that salary as a condition for its $7 billion low interest loan under a federal bailout package. “I’d be willing to accept that,” Nardelli said. As for his current salary? Well, he isn’t required to disclose his salary at Chrysler, which is owned by the private equity firm Cerberus Capital Management. Additionally, Chrysler went through only $3.3 billion in the 3rd Q this year.
It is sad to say that the CEO’s of the Big 3, seem to think it’s business as usual and nothing has to change. The only one who seems to be a bit humbled on the situation is Chrysler. Give Chrysler their money in exchange for Nardelli getting a $1 salary. Forget about GM and Ford, especially GM since they sent $1 million from a $25 million retooling plan from the US government, to their Brazil plant, which is independent of the US, and any vehicle that is produced there doesn’t come to the US. And also with GM releasing what I personally call a propaganda threat video about what will happen if the auto industry is allowed to fall.
Obviously GM and Ford aren’t concerned about their workers as they claim they do, and are only thinking of their own selfish pockets. Gluttony, Greed and Pride are three deadly sins that GM seems to be living to follow. Only one more and they are over half way of all seven deadly sins. At best, Chrysler have the money under the terms of the $1 salary, forget GM and Ford. If the CEO’s aren’t willing to sacrifice to help save their companies, then they can go down with the ship and sell out to China. And I absolutely despite Wagoner’s arrogance and greed. Pride, Greed and Vanity are nearly halfway of the seven deadly sins. Or they can oust Wagoner, since obviously he can’t handle his company, put a new CEO in his place, and then give them the money.
But in the end, mark my words, if the money is given to them, at least one of them will ask for more money, and will still end up in bankruptcy. And additionally if the money is given, it’s the end of the free market. If the bailout doesn’t work, and they all fail, or even one fails, the jobs are gone, everyone is effected, and we the taxpayers are stuck with the bill with nothing to show for it. The bailout does not guarantee the success of the Big 3, and thus it does not guarantee that jobs are saved, and it also means that the bailout money is not paid back.
Here’s a videos to take a gander at. This is when U.S. Rep Jeb Hensarling (R-TX) questions all three CEOs about how can the Big 3 guarantee that they will not be back in a few months asking for more money, and why giving them money is going to work. When questioning GM CEO Wagoner about actually seeing the plan, he replies that basically it’s up to the SEC to allow viewing that information.