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Post by jaydeehess on Nov 26, 2008 19:07:45 GMT -4
If Red Bull Air Race pilots can take 10 g's then so can a highly paid CEO.
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Post by smlbstcbr on Dec 3, 2008 13:03:14 GMT -4
I've heard that because of that expensive trip, they made the journey to Washington in hybrids. Looks that they really need that loan after all.
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Post by echnaton on Dec 3, 2008 13:43:03 GMT -4
It appears more likely that the Big 3 will get the government loans to bail them out. They have completed the business plans required by Congress and are renegotiating last years union contract. Give the imminent bankruptcy threats by GM and Chrysler, I think the bail out will go through. And I bet Bush will sign it.
When the companies run through the government funds and need more, Congress will play the blame game, saying that the plans they were given were not followed. But if you offer liars loans to a dying company do you get to complain when the note is not paid on time?
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Jason
Pluto
May all your hits be crits
Posts: 5,579
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Post by Jason on Dec 3, 2008 14:40:48 GMT -4
To his credit, the CEO of Ford said that he would like a line of credit to fall back on rather than a direct loan, and said that they wouldn't have to draw on the line of credit unless one of the other two companies fail. He also said Ford would cancel management bonuses and merit raises for employees for next year.
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Post by echnaton on Dec 3, 2008 15:46:06 GMT -4
Ford is in a better liquidity position. They started into the sales crunch with a similar amount of liquidity to GM but slower cash burn rate. They also still have the option to sell Volvo. Depending on the length and severity in the downturn of auto sales. They may never need the cash, but it would make lenders breathe easier if Ford had a few more billion in cash liquidity available on short notice.
GM has a net worth projected to be about negative $57 billion at the end of the year and is bleeding cash at an alarming rate. No amount the government is likely to come up with will make the company credit worthy again. The only way to get the balance sheet in order is to go through bankruptcy. This will allow them to convert debt into equity to recapitalize the company and revalue some assets up to actual value. Then lenders can have a clear picture of what they are worth and be able to lend to them with an expectation of repayment.
Bankruptcy could also get them out of the idiotic JOBS bank program that forces the company to pay unneeded former employees to sit and wait for rehiring that will never occur.
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Post by PhantomWolf on Dec 3, 2008 16:21:38 GMT -4
Of course you realise that this isn't entirely different to the bail out of the Airlines after 9/11....
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Post by jaydeehess on Dec 3, 2008 21:06:24 GMT -4
To his credit, the CEO of Ford said that he would like a line of credit to fall back on rather than a direct loan, and said that they wouldn't have to draw on the line of credit unless one of the other two companies fail. He also said Ford would cancel management bonuses and merit raises for employees for next year. Why would GM or Chrysler failing make it neccessary for Ford to draw from a line of credit? I would have thought that a GM failure would be good for Ford sales. Gee, no performance bonuses for company execs whose company is not performing well, what a concept!
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Post by Apollo Gnomon on Dec 3, 2008 22:48:36 GMT -4
Our economy needs a good land war against a well-equipped state army. Tanks, planes, population removed from the labor pool and put on the government payroll....
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Post by echnaton on Dec 4, 2008 11:03:15 GMT -4
Our economy needs a good land war against a well-equipped state army. Tanks, planes, population removed from the labor pool and put on the government payroll.... But that would involve the most famous classic blunder, getting involved in a land war in Asia.
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Jason
Pluto
May all your hits be crits
Posts: 5,579
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Post by Jason on Dec 4, 2008 12:11:30 GMT -4
To his credit, the CEO of Ford said that he would like a line of credit to fall back on rather than a direct loan, and said that they wouldn't have to draw on the line of credit unless one of the other two companies fail. He also said Ford would cancel management bonuses and merit raises for employees for next year. Why would GM or Chrysler failing make it neccessary for Ford to draw from a line of credit? I would have thought that a GM failure would be good for Ford sales. Gee, no performance bonuses for company execs whose company is not performing well, what a concept! True, he doesn't deserve a lot of credit, but at least its a step ahead of the other two. I heard it reported this morning that some of them are taking another look at bankruptcy as a way out of their difficulties.
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Post by JayUtah on Dec 4, 2008 12:16:42 GMT -4
Of course you realise that this isn't entirely different to the bail out of the Airlines after 9/11.... Maybe not entirely different, but significantly different in my mind because the decrease in air travel was precipitated by an external, unforeseen act of war. That's different than having an unprofitable business plan that cannot survive ordinary global market competition.
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Post by JayUtah on Dec 4, 2008 12:17:40 GMT -4
But that would involve the most famous classic blunder, getting involved in a land war in Asia.
I know some Sicilians...
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Post by echnaton on Dec 4, 2008 12:44:19 GMT -4
Of course you realise that this isn't entirely different to the bail out of the Airlines after 9/11.... Using bankruptcy to get out of union contracts is a time honored tradition in the airline business. Though it is tougher than it used to be. Airlines can continue to fly while in bankruptcy and auto companies can continue to produce and sell cars. Auto companies now and airlines then needed to recapitalize and cut costs. Delta spent time in bankruptcy but came out a functional airline. But mostly what they need is sound debt markets. Government bailouts that perpetuate weak companies will keep borrowing costs high by not restoring lending confidence.
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Post by JayUtah on Dec 4, 2008 13:38:50 GMT -4
Why would GM or Chrysler failing make it neccessary for Ford to draw from a line of credit?
Because Ford would be expected to buy up the failed company's assets in order to preserve production capacity and intellectual property, and to relieve the failed company's creditors. A car-maker's assets are most valuable (i.e., fetch the highest liquidation price) when sold to another car-maker. Companies fail for many reasons, not all of which indicate that its product or core competency is without value. But a receiving company will need cash to buy up the assets.
There's a good parallel here to the mortgage problem. A homeowner who defaults on his mortgage has demonstrated himself unable to "run the business" of owning a home. The failure of that "business" may have little to do with the intrinsic value of the property. Nevertheless his creditors will remove him from leadership of that "company" and seek out those who can make better use of the house. That generally means selling the house to people who can demonstrate they already know how to run a house as a business. But that prospective buyer will still need to have the cash to pay the creditors' price. The worst outcome would be for the property to crumble to ruin. Everyone loses.
Gee, no performance bonuses for company execs whose company is not performing well, what a concept!
Right. There is a growing backlash against what the rank-and-file feel are flimsy rationales for lavish, no-risk compensation packages offered to executives.
Most American workers are indoctrinated in the notion that a merit-based compensation structure is, for them, at best an iffy proposition. In every budget cycle, payroll is set down ahead of time. Many companies use a normalization process to measure and fit employees to this preset availability of funds, leaving many disenchanted workers who made a great effort but simply failed to rank in the top 5% among their peers and thus "merit" a raise.
Compare that to the CEO, who is perceived to be almost guaranteed a luxurious reward, regardless of the company's performance. While it's great that CEOs can work for $1, most of the rest of us can't. It's refreshing that the millions of dollars that would have gone to the CEOs of the Big Three will be going to more useful pursuits. But why do we pay millions of dollars to people who clearly don't need it and who apparently don't deserve it? Especially when the rank-and-file languish in the vast middle of the normal distribution with, at best, only a salary increase that doesn't even keep pace with inflation.
The bourgeoisie can't easily go cap-in-hand to the proletariat without expecting some sort of reality check.
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Post by echnaton on Dec 4, 2008 15:16:03 GMT -4
Executive compensation and over compensation is an interesting problem. Ford CEO Mulally came from Boeing. He was a top VP but had been passed over for the CEO job there. He likely could have stayed at Boeing and maybe been selected as CEO later.
Ford however needed an outstanding executive with experience to replace William Clay Ford, who by his own admission did not have the ability to manage the company through the necessary restructuring. So to hire Mulally, Ford has to offer him a compensation package that compensates him for his skills and effort but also for the risk he is taking in leaving a thriving company to lead a broken business. That kind of compensation usually includes significant stock options or grants of restricted stock. So at some point the turnaround fails to provide results. But the company also has a compensation contract with the CEO that it is obliged to make good on. This can lead to exorbitant pay while the company is failing. If Mulally were to leave Ford today, the company would still have to pay top dollar to hire a new CEO with proven skills to lead Ford. That would be expensive.
You see this in bankruptcies and other turnaround situations. I have a friend who is a CFO in a businesses that specializes in turnarounds. The debtors hire the firm to staff key executive positions because they are skilled in business turnarounds. It is very lucrative work and he may be CFO for several companies at the same time. But valuable to the debtors because the firm has a good record at salvaging value from the failed businesses.
Mulally's salary is clearly excessive from a political point of view. And since he is asking for availability of public money, that becomes a factor. Is is excessive from a recruiting point of view, I doubt it. Is it excessive from a contribution point of view, probably most CEO's are excessively paid.
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