Posts tagged with: rick wagoner

Blog author: jballor
posted by on Thursday, April 9, 2009

AS NYT columnist Frank Rich observed earlier this week, it’s hard to find much sympathy for Rick Wagoner. “Sure, Rick Wagoner deserved his fate,” writes Rich. “He did too little too late to save an iconic American institution from devolving into a government charity case.”

The delusions of the CEOs who lined up on Capitol Hill last year to lobby for bailouts extended beyond the arrogance of flying to congressional meetings in private jets. Duly chastened, the CEOs next made the pilgrimage in a caravan of hybrids, but still didn’t realize that some of them might be lobbying to lose their jobs.

If they had realized that in getting a government bailout they would be getting far more than they expected, they might have thought longer and harder about taking public money. I’m sure that Ford CEO Alan Mulally is happy that his company is the only one of the Big 3 that isn’t currently beholden to the whims of the federal government.

Companies who take government money are going to learn what charities who have gone on the government dole learned long ago: he who writes the checks ultimately calls the shots. In biblical parlance, “the borrower is servant to the lender.”

The fate of Rick Wagoner should be a cautionary tale to all those companies who are considering government bailouts, just as the fate of so many faith-based nonprofits serve as warnings to those who want government subsidies.

Blog author: jballor
posted by on Monday, April 6, 2009

It made headlines last week when General Motors CEO Rick Wagoner was asked to resign by representatives of President Obama. Fritz Henderson, G.M. President, was announced as Wagoner’s successor to the top spot in the troubled car-manufacturer.

Henderson faces a series of directives from the Obama administration intended to retool G.M. As New York Times reporter Bill Vlasic notes, “The government has mandated that at least two-thirds of the debt of bondholders be swapped for G.M. stock, and that half of the retiree trust obligation also be financed with company stock.” If Henderson is unable to meet these demands, then the Obama administration has made it clear that bankruptcy is the alternative.

“We will either do it out of court or we will do it in court,” Mr. Henderson said. “But we will get the job done in terms of recreating and reinventing General Motors as a competitive enterprise.” In the sacking of Wagoner and the hands-on approach to forming G.M.’s future the federal government has flexed its muscles, refusing to be a passive partner following the extension of bailout funds to a host of corporations.

Given the precedent this might set, this week’s PBR question is: “Should the government control bailed-out companies?”