The news regarding $165 million in bonuses paid to AIG executives has been making the rounds. A lot of people are trying to come up with solutions on how to get back some or all of that money. There's a lot of legal back and forth about whether it's even possible or that doing so would hurt AIG by having "good" executives leave (are there not a lot of "good" executives currently out of work that couldn't fill their spots?). Since I'm a solutions oriented guy, I have a suggestion that might solve everyone's issues. Just reduce the next bailout payment by $165 million. Believe me, $165 million may sound like a lot but compare that to the billions we've given AIG so far, it's really not that big of a deal. More than anything, it's a public relations issue and not an operations issue. So to soothe the public's concern, just deduct the bonus amount from the next payment and call it a wash. It'll be a lot easier than lawsuits and grand standing but maybe to all the politicians the publicity was all they cared about.

UPDATE: More craziness has insued.  From a special surtax to executives allegedly being asked to commit ritual suicide.  Again, in my opinion, it's an opportunity for certain politicians to cash in publicity-wise on the outrage by the taxpayers.  However, towards the end of the article, there is mention that the Treasury would try to restructure the next bailout payment to recoup the bonus amount.  That's probably the most frictionless way to do it.

Techcrunch has a guest post from Todd Dagres of Spark Capital. In it, he suggests that President Obama should get Steve Jobs to run a joint government bailed-out GM-Chrysler. Though I agree with the overall strategy of the article (firing the current auto execs and streamlining the product line), I don't think Steve Jobs is the best person to actually execute this. His other choices (should Steve not be available), John Chambers or Craig Barrett are somewhat more plausible, though not quite there.

It's a little simplistic to think that Steve can make everything he touches into gold. Though Steve has had great success at Apple and Pixar, the shear size of the auto companies dwarf even those two industry leaders. I think Steve could be a great product strategist for the auto industry, but I think it'll take someone with big industrial operational experience to execute on a new product vision. Maybe it's a tag team effort - Steve leading product development and someone like say, Jack Welch to run operations? I know Nardelli was a GE alum but I don't have much confidence in his ability to lead given his lackluster results at both Home Depot and Chrysler.  Perhaps the master can do better than the student.

News came out today that GM and Chrysler seek an additional $22 billion in aid from the government. That's in addition to the $17.4 billion already committed. I just can't see throwing good money at a poorly run business. It's one thing to bail out banks because credit markets affect a lot of people. However, bailing out an automaker that continually makes poor decisions and even poorer cars is crazy. As a condition of any bailout money, I would request that all the CEOs and upper management be fired. I applaud what Ford has done in not requesting bailout money. Of the three US auto manufacturers, I'd most likely buy a car from them. Isn't it telling that the car maker that churns out the better products is the one that least needs help?

I woke up this morning to the radio airing the news that the auto bailout has passed.  I'm glad a lot of people won't be losing their jobs but I think we're only delaying the inevitable.  The $17.4 billion bailout has provisions that require, among other things, the automakers to "prove they can restructure sufficiently" or those loans would be called back.  My question is, can the automakers really turn it around?  It's like a gambling addict who just needs some seed money to win back all the losses his accumulated over the years.  Chances are, it's just not going to happen.  And what if they don't sufficiently restructure?  Would they really care if the loans are called back?  They'd be in the same position they were before the bailout except now with three months of salaries paid.  And actually, I don't think Congress would have the guts to actually do it.  The old cry of "we can't let the US auto industry fail" will be heard again.

If the government really wanted to make a difference, they should have asked for the resignation of all top level executives from any company that asked for a loan.  The way it's setup now, these automakers will come back to Congress in March and either ask for more money or time to prove they are restructuring (probably both).  Why would anyone give money to a group of people who have a history of failure?  This is in stark contrast to a company like Toyota who hasn't had an annual corporate loss in 71 years (they expect to end the current fiscal year with a loss).  In fact their profits in 2007 alone were $14.9 billion - almost the same size as the current bailout.  With a cushion like that, who needs a handout?

News came just a few hours ago that the proposed government bailout of the three major US automakers had failed. The speculation is that at least one or maybe all three may file for bankruptcy in the near future. At stake is not only up to 350,000 jobs but the future of the US auto industry. Will we see any or all of the big three being sold off to foreign companies? Or will they just go away and the only cars available in the US will be from Asia or Europe?
 
For those who may think the worst during this time, I actually think a "correction" in the US auto industry might be good in the long run. Of course in the short term many people will lose their jobs - never a good thing. However, my hope is that this wake up call will jolt the US auto industry into action. That could mean cleaning out obviously ineffective executives, restructuring to become leaner/meaner, focusing on quality and designer, or hopefully all of the above. America has invented a lot of great products like the automobile, television, and microprocessor. The microprocessor is probably the only one of those three which the US still can be considered a leader in terms of innovation and quality. Let's hope this shake out is the first step towards regaining that stature in the global automobile industry.

I'm reading the details of the Big 3 automaker's recent request for a $25 billion bailout.  Specifically, I'm referring to high salaries for executives in the midst of multi-billion dollar losses.  It's not the amount of the pay that bothers me.  CEOs and executives of multi-billion dollar companies are entitled to compensation above and beyond what normal folk should get.  What really gets my goat is that the domestic automobile industry has been lagging behind foreign players for years now yet none of these CEOs really seemed to care.  Instead of innovating, they decided to ask for a handout.  And I'm afraid that the government will give them this bailout for fear that tens of thousands of rank and file employees will lose their jobs.  The problem is that it will continue to perpetuate a philosophy of mediocrity amoung the employees of the automakers.  Do you think if Yahoo was given a bailout that Jerry Yang would have stepped aside?  It took the dramatic act of Yang leaving Yahoo for that company to finally move forward.  I doubt any of these CEOs would do the same.

On a side note, Toyota's chief makes about $1 million a year and his company generated close to $15 billion in profits last year.  I guess I should be a little upset.