Financial rescues: The blind leading the blind

Today's Financial News - Posted December 2, 2008

The new Capital Visitors Center was unveiled in Washington today. It was more than $500 million over budget and three years too late. If our leaders cannot manage a building project, how in the world will they save companies like Ford (NYSE:F) and General Motors (NYSE:GM)?

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): I am not one to pick on a company’s management and blame all of its problems on its top decision makers. Until recently, I said very little about Detroit’s CEOs. After all, they were dealt a bad hand from the start.

But my opinion of respect is waning fast. In fact, I am starting to think the Big Three are run by a set of incompetent suites that are nearly mirror images of our even more incompetent elected politicians. For proof, look at the so-called detailed business plans the automakers handed Washington today.

Ford (NYSE:F) tells us absolutely nothing new except that it may not even need bailout money and if it does take the money, its CEO will work for a buck a year. After coming back to Washington with this less-than-informative report, I say we give Alan Mulally nothing and hold the door for him on his way out.

Here’s what the report should have said, but did not. First, if Detroit is to survive, it must deal with its expensive wages and legacy costs. Mulally may miss his annual bonus this year, but if assembly line workers are still earning the equivalent of more than $70 an hour, a $20 million CEO package looks downright cheap.

And what about all of those expensive brands Ford is wasting money to support? Mercury and Volvo must go if the company is going to compete in a long-term fight with Japan, but today’s report mentions nothing about how Ford can unload these burdens.

It did mention, however, that Ford plans to hurry its development of hybrid and electric vehicles. Unfortunately, the company is about ten years too late. If it hurries, Ford can put electric cars on dealer’s lots just about the time gas is selling for a buck a gallon.

When consumers want hybrids, Detroit sells Hummers. When we want Hummers, here come the hybrids.

Dumb and dumber lead the nation

Unfortunately, Detroit knows Washington is an easy mark. It would be political suicide to let an automaker go down in flames. A cash infusion has been a near-certainty for almost two months.

So why should Ford, General Motors (NYSE:GM) or Chrysler make public concessions and risk creating burdensome goals to meet in the future?

The business plans these CEOs were told to create were no more than a decoy used to take heat off of Congress. If any of the automakers fail, Congress is essentially off the hook. The less detailed the plan, the more room Washington has to wiggle its way to re-election. Detroit knows it and is calling Congress’ bluff.

Why any American would believe Washington has the cognitive skills to figure out if a business plan is viable is beyond me. The city has been the capital of wasteful spending since right about 1776.

Need proof? Head down to the brand new Capital Visitor Center on Capitol Hill. When the plans were first approved, the building was scheduled to cost you and I just $71 million. When they finally cut the ribbon three years behind schedule, it cost the American taxpayer more than $620 million.

If we give them a dollar, they spend ten.

If this is not enough political spit in your face, just wait until you see what Washington does in Detroit.

If our lawmakers cannot figure out how to build a visitors center on time and under budget, there is no way they will ever figure out how to turn around a devastated manufacturing industry.

The “Automaker’s Memorial” should be unveiled sometime around 2010.