Odd in the Extreme

On Sunday night we got the word that GMs CEO had been forced out as a condition to get more federal bailout. From my perspective it is an disturbing development. Chrysler to get their booty were advised they need to merge or form some form of alliance with Fiat. (How apt a name.) There should be little confidence that this new round of dollars will help the companies grow stronger.

The President, who has no experience in the auto industry said there had been “a lot of mismanagement of the auto industry over the past several years,” and declared that more government help would be contingent on the companies’ “willingness to make some pretty drastic changes.” I wonder how he could make that judgment.

In its story the New York Times made a slight error - "Like Mr. Wagoner, Mr. Henderson is a graduate of the Harvard Business School and a lifer at G.M. He started in the finance division in 1884 and later spent nine years in executive positions in South America, Asia and Europe. The Detroit-born son of a G.M. sales manager, Mr. Henderson, 50, became chief financial officer in 2006 and was named president and chief operating officer a year ago."

One wonders about this on many levels. First, with a government that is out of control financially, what kind of expertise have its leaders demonstrated in working through the complexities of a business like the auto industry? Second, although there are some financial experts on the Administration's auto task force, there is very little, if any expertise in the auto industry. Is this primarily a set of questions that investment bankers could solve - or would it be better to get someone with some actual working knowledge of the industry? Third, don't we already have a mechanism for solving these kinds of restructurings - called bankruptcy?