The Oracle of Omaha has made the reasonable suggestion that the Big Three automakers’ CEOs put their own money where they want taxpayers’ money to go, by investing a significant portion of their own net worths in the Detroit-based companies. Warren Buffett said last week that he would tell the executives, “We’ll give you more upside, but you’re going to lose if we lose.” Buffett, a member of President-elect Barack Obama’s economic transition team, also said that bankruptcy is the less preferable of two choices for the industry. “The other one is to have the president of the United States sit down and say, ‘Look, we’ve got $25 (billion) or $50 billion, if the outcome is going to be a successful American auto industry, and we need a business plan that will work. You can get it in bankruptcy, or you can get it from me.’”
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8 Comments
This is a boilerplate way to align the goals of CEOs with the goals of the organization, forcing CEO skin into the game. It’s not a new idea, but it’s probably a good one anyway. Problem is that I don’t think these guys are skin guys, they’re factory guys.
It ain’t the thought of saving their own skin that motivates them (although they’re smart enough to grow their own skin, i.e., behave in ways that will enrich themselves, personally). Buffett’s idea hinges on the concept of personal risk. Personal risk is not what Detroit CEO’s handle well, imo. Just as in Leona Helmsley’s world taxes were for “poor people,” in Detroit’s executive class personal risk is for Detroit’s union guys. Detroit’s executive class doesn’t do personal risk. They’re above all that.
The guys who respond to skin — in the way Buffett refers to skin — are usually the guys who started the biz in the first place (entrepreneurs), or finance guys.
If Detroit needs guys who behave in the organization’s best interest when their own personal “skin” is on the line — and I think Buffett is correct — then they’ll probably need new CEOs.
Let the oil companies bail out Detroit. They have a stake in this mess. They fought against mandatory higher mileage requirements.
I AGREE AND How about having the Unions having their skin in the game also. All their stock investments should be in their own company. The workers retirement should be invested in their own company. Then we would see some motivation to see success.
If I loose tax money then they should loose big.
The union workers only make the product that they are asked to.
For 20 + years, America and the bosses in Detroit have asked them to build the wrong product.
No golden parachutes. Limit the salaries of the CEO’s and execs. GUT the corporate boards.
I say, unless all parties involved are willing to put their skin on the line, LET THEM GO BANKRUPT.
The auto manufactures need concession just like the airlines and train companies have in the past.
Follow the raiload analogy (learning from mistakes made there). Two new government-sponsored corporations should be created – one for cars/minivans and one for trucks and heavy equipment. Buy the ASSETS of the failed Detroit Three. Then launch an accellerated program of re-equipping our National Guard units across the country replacing their equipment that has been given away to oil-rich Iraq.
Push the car company to be competitive with the other auto-makers in the Ubited States (e.g. Honda, Toyota … )
Agree with Buffet. I also think the workers will take a hit. However the last two times they did the managers gave themselves million dollar bonuses and the next time they took some of the union retirement. It’s really the management that needs to take the hit and change their business plans to something that is workable.
This is why the worker has to have skin in the bail out.
Pay attention to the last few words ( after 3 minutes). It says a lot!
http://info.detnews.com:80/video/index.cfm?id=1189
http://info.detnews.com:80/video/index.cfm?id=1189