As Goes GE, so goes Management
Henry Paulson’s book On the Brink is getting pilloried all over the place. David Wessel raises a point I’ve been hammering for a while:
Jeff Imment, CEO of General Electric, frightened Paulson in early September by calling to say GE, which Paulson describes as “an American business icon,” was having trouble borrowing money by selling IOUs known as commercial paper, and visited Paulson several days later in person. In mid-October, Paulson called Immelt to discuss imminent plans for a Federal Deposit Insurance Corp. guarantee of all new bank debt, but not GE’s. Immelt told him not to worry, GE would manage and would benefit indirectly by a more stable banking system. The next day, Immelt called back and said the bank guarantees were hurting GE’s finance unit because banks could borrow with U.S. government guarantees and GE couldn’t. And on Oct. 16, 2008, Immelt came in person to press the matter with Paulson. Over the following weeks, Paulson and Treasury official David Nason “worked hard to get Sheila [Bair] comfortable” with extending the guarantee to GE. In November, she did. GE’s finance unit…became one of the biggest users of the program.
The transition from “an American icon” to “a poorly-run finance company” had already been made by one “icon.” And its salvation is presented by Paulson as part of a “domino sequence.” Wessel:
The federal rescue of Citi led directly to the rescue of General Motors and Chrysler. “Nancy Pelosi [the speaker of the House]… told me point-blank that it was politically impossible to rescue Citi and not help the automakers. She had until recently opposed bailouts for the car companies, which she considered poorly managed.”
Top management of Citi, last two iterations: Vikram Pandit, Chuck Prince, Bob Rubin, and Richard Parsons.
Top management of GM, last two iterations: Rick Wagoner, Jack Smith, Ed Whitacre, Jr.
As Business Week (via Wikipedia) dryly noted of Smith and Wagoner:
After GM lost $30 billion during a single three-year stretch in the early 1990s, Wagoner and Chairman John F. “Jack” Smith Jr. forced GM “back to basics” to battle “30 years of management mistakes” that left him with little room to maneuver.
I don’t know about anyone else, but I’d take the latter set over the failed hedge fund manager, failed CEO, ineffective Chairman of the Board, and guiding force for TWX behind the AOL/TWX merger.
UPDATE: Jeff Gerth has more on GE’s condition.* American icon, indeed.
*Given Gerth’s track record, the article should be taken with a ten-pound bag of salt.
The Economic Fractal’s Second Modest Proposal: The IRDC US Political Party
The IRDC Super Party: The Independent Republican Democrat Centrist Super Party
The global monetary-banking-financial system that forms the basis for possibilities of reasonably fair and socially beneficial economic growth is …. simply … broken.
The self designated defacto fixers of that broken system are in fact both the principal causal elements of the broken system and the members and beneficiaries of the current broken system.
With the old system’s failed and bad rules enforced by its current principal beneficiaries, the broken system will never be fixed.
There will only be more disproportional rewards for the owner of the broken system: the self acknowledged too big to fail financial industry.
Kindly consider this. The rewards and benefits of the members of the financial cartel are in reality much greater than the often quoted nominal 2009 over 2007 gains. That 2009 purchasing power of the cartel’s members’ earnings is denominated in surviving dollars in an environment of a 20 percent reduction in US citizen net household wealth over the last 30 months and a 5-6 percent increase in unemployment that reduces the demand side cost of wages. Real estate can now be purchased for both 15 percent less and with lower interest rates.
(The leveraged damage done to US citizens are relatively greater than other world citizens and their fiat currencies… any questions regarding a rising dollar relative to other fiat currencies?)
Those 2009 dollars earned, but for congressional intervention and tax-payer re bankrolling, by a bankrupted financial industry, can now buy 20 percent more than in 2007 more and likely 30-40 percent more later in 2010.
The Financial Industry members have made out like the bandits they are.
Cicero two millennium later speaks: Res ipse loquitor….
What would be a sine qua non metric target for a successful stable fair real economy? One possibility would be a working citizen benefited monetary financial system where, for example, graduates going into an engineering careers or teaching careers earn more than graduates going into the financial industry.
With the owners of the monetary system firmly in control of congress, is there any possible hope for remedy?
Perhaps it is time for the establishment of a coalition super party – the IRDC party.
The IRDC party, the Independent Republican Democrat Centrist party (the C could also represent Constitutionalists) likely already includes the philosophical, if not the I want to be re-elected – majority of US congress people.
The Centrist IRDC platform is simple. Create a fair economic system that values hard work and economic creation of useful real goods and services and conversely implements effective new rules which restricts private citizen or corporate wealth creation from manipulation of the monetary system.
Politicians could run either as an IRDC candidate, an independent, a republican, or a democrat supporting the centrist principal platform of restoring real fairness and worth to the economic system. After successful election republicans, democrats and independents who ran on their respective republican, democrat, and independent tickets and who supported the IRDC platform could then join a majority IRDC caucus and be a member of a majority party entitled to chairmanship of key committees.
Think about it. The IRDC Super Party – a great reckoning for Wall Street and the Wall Street run world.
The establishment of a Super Party Constitutional and Centrist majority offers the chance to begin anew with new rules and underlying new principles to engender fairness and […]
Before Waggoner and company were shit-canned; GM and the rest of automotive were well on their way to downsizing having closed many facilities, laying off thousands of white-collar and blue collar employees, having won wage concessions for new union employees at 50% of previous wages, transferred healthcare costs to unions, cutting carlines, etc. and then Wall Street went cliff diving with the economy in toll taking a weak automotive with them. Of course we can always believe Corker, Shelby, and Miller that automotive employees get paid $75/hour.
It is all about timing . . .
The US needs booms, cannot stand busts.
What chance does management have to set strategy and make things work?
The problems of the US auto industry are the problems of the US manufacturing economy.
Their products are generally mature. low margin, their immutable costs are immense. Add unrestricted competiton from foreign competitors which hold several advantages over the US manufacturing sector, not the least of which better labor markets and significantly lower social insurance costs. The US auto industry is to the US laborer what the Japanese, Canadian and Euro governments are in terms of social insurance.
That burden aside…………………..
Auto manufacturers to differentiate themselves must introduce new gimmicks and techie wizardry. The US manufacturing sector has significant cost/performance issues with engineering, and introducing new differentiating features.
It must compete with the militarism; hogging engineering talent, paid very well, with pork projects that fail at building new weapons which are not needed for any real threats, fortunately military hardware can be shoddy quality and not perform.
The US manufacturing sector talent is plundered by miliatarism and hindered by anti social conservativism where it is good for big money to plunder while demanding socialism’s defeat.