Auotmaker Bailout & Executive Compensation = Layoffs - Plain & Simple

I am going to follow the age old KISS rule regarding this particular post - Keep It Simple Stupid.

There is more than enough proof out there to back up this claim, let's take a look.

Recently General Motors Corporation announced that it will close plants, dealerships, and various other facilities resulting in the loss of thousands of jobs. Really?!

This particular issue is one that I cannot simply take in stride. I have to call BS on this or in the case of this blog and its spirit, CS (Common Sense).

In 2008 GM CEO Rick Wagoner (GM lost over $30 billion in 2008) was paid roughly $15 million dollars. In addition, the 4 highest paid GM executives under Wagoner were paid roughly $25 million dollars. The grand total for the 5 highest paid executives at GM in 2008 rounds out to nearly $40 million dollars.

Now, I could crunch the heck out of these numbers with a Wall Street level of proficiency, making what I would be presenting as difficult to understand as the documentation many of us receive from our IRA or 401K provider, but again...let's stick to KISS on this one and some good old dumb guy math.

In 2007 the median annual household income in The United States of America was estimated at around $50,000.00. Using that basic figure it is pretty simple to see that had the 5 GM executives referenced above took a pay cut down to $250,000.00 per year each, GM could have avoided cutting the jobs of nearly 800 average American workers. I know, I know...not a world beater, but it is 800 jobs that there was absolutely no good reason to cut. If an executive cannot live off a $250,000.00/year salary...you get the point.

Now, just throw in the estimated $15 billion that GM borrowed from the same people it is now laying off, and we can deduct that GM could have kept about 300,000 average Americans working in 2009...oh, plus the 800 or so that could have been saved by GM executives living the poor life at a mere $250,000.00 per year. In other words, only about $21,000 per month.

I am aware that all of the very intelligent economists reading this blog post are probably thinking, wow...this guy doesn't understand big business or financing. There are so many other factors to consider etc. etc. Keep telling yourself that as long as it makes you feel better. $15 billion is enough to payroll nearly every GM employee on earth if not all of them for 1 year. That said, they just had to break even on their overhead expenditures, and with a roughly $38 million dollar savings on executive pay...they should have been able to limp by until GM could recreate its image and product lines. It isn't brain surgery, it is just simple common sense.

On top of all the job cuts that automakers like GM and Chrysler DID NOT have to make because they could have dramatically cut executive compensation at all levels across the board and worked smarter, now we finally get the best news of all. Chrysler will not be paying back the tax payers who apparently loaned Chrysler money so it could afford all of the administrative costs it would incur by firing them. According to recent news, we shouldn't be surprised to see GM follow Chrysler's lead. In fact it appears GM is trying to keep pace with Chrysler layoffs at this point, as if it is a race to see who can inflict the most unnecessary damage.

Look, you won't find a more ardent supporter of capitalism and free trade than me, but we have collectively tossed common sense out of the window with regards to our markets, trade, and capitalism in general. If the average American family were to operate their household in the way that our government (both parties) has done in recent history, or as our automakers have done recently...then that family would be destitute.

It begs the question, what is the difference between working for a large U.S. automaker and being robbed at gun point? At least a thug criminal has to stand in front of you and face you before he/she robs you blind. Apparently large U.S. automakers are only required to fly via private jet to our nations capital, collect American Tax Payer Dollars, retire with a golden parachute, and then fire you via certified mail that your tax dollars paid for.

As a plug for my previous post titled Government - The Anti-Society...you have to love the government that rules you in place of serving you!

I am not sure that all the GM and Chrysler employees being affected by this nonsense were ever asked to sign or approve the multi billion dollar checks their ex-employers (severely overpaid executives) were being handed that were funded by their tax dollars. No, instead they were made to believe via the media and government press machine that those tax dollars HAD TO BE GIVEN to GM and Chrysler. The average American just didn't know enough about the complexities of it all, so each needed to trust the government. After all, it is clear the government knew exactly what it was doing?!

Please feel free to read into this that I am saying in this instance the government ruled the tax payers, but did little to serve them.