Will Someone Please Go Buy a Buick?

Take a look at this chart. GM stock owners are well aware of what has happened to their stock over the past year. Since February of ’08 GM stock has lost 92% of its value, from $25 per share to today’s $1.77.

That, friends and neighbors, is cheaper than the national average for a gallon of gas.

Which, by the way, is no different than conditions in October of ’08 when this news clip aired on CBS.

And the guy in the video is right. Right now is not the time for GM, or any auto manufacturer to be strapped for cash, which is why they are begging for more stimulation.

They need the money to retool.

So the real problem is that GM is making cars that no one wants to buy because a) the cars use too much gasoline, b) customers can’t be certain they will have a reliable supply of spare parts, and c) everyone is waiting for American car companies to make hybrids or battery-powered cars.

And they can’t make these new cars until they retool.

It’s a vicious circle.

So everyone go out right now and buy a Buick, OK?

And I’ll go out and buy some shares of GM stock at bargain basement prices. Heck, at these prices GM is worth more as a source of scrap metal.

GM and Chrysler Get Billions; Execs Promise to Work for a Dollar

Well he did it. George Bush just soaked us for another $17.4 billion to give to his friends in the auto industry. This brings to a close one of the biggest blackmail cases in US history, where the compensation, 17 billion dollars, is the largest payoff in history, and the hostages, 3,000,000 workers, also the largest in history.

The ransom note said something like this: “We have your country. Pay up now or 3,000,000 will people lose their jobs and the economy will be laid waste.”

And so, unbelievably, rather than call their bluff and nationalize the industry that they themselves pointed out was a threat to national security, Bush ponied up.

But the loan, the White House says, comes with some strings attached. The corporate executives have to give up their corporate jets and take a reduction in pay. No problem said Ford and GM CEOs the last time they were in DC, we’ll work for a dollar a year.

Well Katy bar the door, as the saying goes. Here comes a fleecing.

When you look at how GM compensates its executives, here, their salary pales in comparison to all of the other compensation instruments available to the big boys.

I summarized it all below in a table of non-salary compensation. Click to enlarge.

That’s right, those 5 guys take $33 million a year in other-than-salary compensation. Their salaries are a mere 17% of that compensation. This means that they get all of that money to buy stock at lower than already low market prices, and the loan itself drives up the price of their stock.

But that’s OK, if the execs fail to deliver on a restructure plan, the Obama government, Bush promises, will call back the loan and effectively kill off two of the big three auto makers.

Bush knows how to cut a deal, doesn’t he?

Nationalize the Auto Industry

I have been watching the to and fro arguments on why or why not to bail out the Big 3 auto industry: General Motors, Ford and Chrysler. The arguments are shrill on both sides.

Conservatives of both parties are arguing that these companies are “dinosaurs” and the only thing that has occurred that threatens their existence is fatal mismanagement by their own obscenely overpaid management. They don’t build what Americans want and have ignored market trends. Their workers, union workers mind you, are overpaid and lazy.

Sure, they argue, let them file Chapter 11 and let them reorganize. This has happened before and it is what makes our capitalist system the resilient system that it is.

Liberals, Democrats for the most part, argue that this is the premier manufacturing industry in America. To let it die on the vine would be tantamount to inviting a full depression with the 3 million jobs that the auto industry directly or indirectly supports.

Some argue that letting GM go under would be a blow to our national security because of the many defense industry products that it produces.

And that got me to scratch my head.

Defense industry? GM?

Well, yes, in the past. In years past GM had a military division that produced all manner of weapons and things that promoted the killing of our fellow man. GM Defense it was called. But to my recollection, that division was sold off to General Dynamics in 2003.

Another model decision from GM’s management, selling off a military war materiel manufacturing division right in the middle of two shooting wars.

But they still retain a corner in the market of military trucks. They still make and sell the LSSV (Light Service Support Vehicle) also known as a pick-up truck. There is also their
EMP (Enhanced Mobility Package) – God knows what that is. Maybe it’s an automobile.

I can see both sides points here. That is a fatal flaw in my character. Both sides make good points.

So here’s the thing. Are the three companies that dominate America’s largest industry being led by incompetent jerks who are now engaged in begging for corporate welfare? Absolutely. Do I trust them with $25 billion of public money? No way. Is this industry so important that the collapse of it will have a domino effect that will doom our country to an unrecoverable depression? Alas, that is also true.

So what is the answer? Are we going to fork over these sums to these incompetents anyway? No way.

The answer is clear, and I never thought I would hear myself saying this, but the answer is for the Feds to buy up the auto industry.

Nationalize it.

Think of it. If this is the premier industry of our nation, and its collapse will drive the rest of us into economic ruin, this industry is a threat to our national security.

Letting the private sector mismanage this uber-industry when it is so key to keeping us economically sound makes no sense at all. It makes as much sense as privatizing our military services. Letting GM management take over at the Pentagon.

So see? There are not two alternatives that may or may not work. There is a third alternative that eliminates all of the minuses of having a critical industry managed by idiots whose solution to the gas price crisis was not to engineer lower mileage autos, but to guarantee $1.99 gasoline to SUV customers.

And it eliminates the feeling of throwing good money into a garbage disposal. If we, the people make the investment in buying out the Big 3, we the people get to share in the profits. Right?

After all, we’re not Communists.