Thursday, April 02, 2009

Event: A hundred Wagoner loads of thoughts will not pay a single ounce of debt.

"Here’s the part I find odd. Now, the government didn’t ask any of those Wall Street C.E.O.s to quit. Isn’t that kind of a double standard? I mean, if you build Cadillacs, you’re screwed. But if your chauffeur drives a Cadillac, you’re O.K. Whew!"
- Jay Leno

Two or three days ago, I forget what it was, the news was packed dense with details on the travails of Chrysler and GM, and most of this focused on the ouster of General Motors CEO Rick Wagoner. The Danziger cartoon above encapsulates some of the ironies of the current situation; a career-long affiliation and decade plus executive tenor coupled with an inability to move product. In fact, this is a constant theme in the books I've been reading on the American auto industry: the inability of the executive financial class to reconcile public demand with a speculative market. For a half-century their strategy has favored the latter, and so their decline in actual market share was foreseen and, once started, ongoing.

What I've noticed in the Free Press and among many Michigan politicians (and, surprisingly, late night talk show hosts who usually like to castigate Detroit and the Big Three) is the increasing tendency to contrast the disparity between the treatment of Detroit and that of the New York financial firms. After all, who has been ousted there? There's no question that, at least where the corporate class is concerned, bankers have retained more autonomy and have received less scrutiny than manufacturers, despite the fact that the mistakes made in the financial sector have been by far the worse.

But the ideas and contradictions embodied in the Leno quote are where things really start to get interesting. It prefers conflation by industry over separation by class, which runs somewhat counter to reality. It's actually a pretty funny joke, but not quite correct when we get down to things. Those who "build Cadillacs," that is, the autoworkers and management, are likely to be subject to forced contract renegotiations in the upcoming weeks and months -- in bankruptsy court if not out of it -- and this is where the force of contrast is a source of dark humor. But then Leno also assumed this slight applies to Wagoner personally: "Now, the government didn’t ask any of those Wall Street C.E.O.s to quit." The former GM CEO isn't hurting these days. He received something of a $20 million severance package, so in the words of our president he's "doing fine," he'll "still be affluent." To put it a little differently, in the Danziger cartoon, our sympathies ought to be with the bedraggled dealer who has worked hard to push his unwanted vehicles, not with a hapless and besuited Wagoner.

I don't share the sympathy of the press for GM's former CEO; he had a decade worth of chances, and while he tried harder than some of his predecessors, he didn't try hard enough. The disparity in the government's response is telling, and has more to do with politics than with our economic health. This week is important as the G20 summit will determine whether we will continue to push our economies through aggressive spending (per the US) or whether we will instead pursue aggressive international financial regulation (per the EU). The fact that this is only posed as an either/or proposition shows how unequal governing forces have been to the economic crisis so far. The fact is, we need both.

In the U.S. where we are enacting broad spending programs and will need to enact more, there is no injustice or impropriety in the government's demands on Chrysler and GM. However, we need to see more oversight of the financial sector, and when it comes, it should be in terms as strong as and stronger than the chastisement the auto industry has received this week.

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