Let’s call it what it is.
First, a definition:
“Under fascism, men retain the semblance or pretense of private property, but the government holds total power over its use and disposal.”
Second, a series of quotes from the Wall Street Journal:
Mr. Wagoner was asked to step down on Friday by Steven Rattner, the investment banker picked last month by the administration to lead the Treasury Department’s auto-industry task force. Mr. Rattner broke the news to Mr. Wagoner in person at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met one-on-one with Mr. Henderson, who will fill in as GM’s CEO.
“On Friday I was in Washington for a meeting with administration officials,” Mr. Wagoner said in a statement released by GM. “In the course of that meeting, they requested that I ’step aside’ as CEO of GM, and so I have.”
And this:
Mr. Henderson said “we’ll be in bankruptcy” if the company cannot meet the U.S. government’s demands for faster progress on its turnaround plan, this dealer said.
Mr. Henderson told employees that the Obama administration was disappointed with the company’s viability plan, feeling it didn’t move fast enough or cut deeply enough into the company’s debt. GM was told it didn’t leave enough money in the company’s pockets to get it through a full business cycle, either, according to the dealer.
GM was also told in no uncertain terms that it must learn to make money on smaller cars–not just trucks and sport-utility vehicles, the dealer said.
Next:
The administration’s task force said it had no intention of replacing CEO Robert Nardelli. Unlike Mr. Wagoner, who had been at the helm of GM since 2000, Mr. Nardelli is considered an auto-industry outsider who has only been in charge at Chrysler since the company was acquired by Cerberus Capital Management LP in 2007.
In addition to pushing out Mr. Wagoner, the task force said GM is in the process of replacing the majority of its directors. Kent Kresa, a longtime director, will serve as interim chairman. Mr. Wagoner will be replaced as CEO by Mr. Henderson, who has been serving as chief operating officer.
Now – let’s be clear, neither GM or Chrysler would be in this position if they weren’t begging the gov’t to keep them afloat. As such, neither company gets much sympathy from me. As many banks are finding out these days, make deals with the devil, and you’re going to get burned.
The MOST ironic thing of all is that the administration’s plan is increasingly likely to be for GM and Chrysler to file for bankruptcy! The desire to avoid this outcome is precisely what lead the two auto makers to come crawling to Washington in the first place. It’s despicable, in more ways than one. Had the auto giants received the proper response back in the fall, they would most likely be in bankruptcy proceedings already. Objectivists have been advocating this from the beginning! Bankruptcy law exists precisely to deal with failing companies. If they can be made solvent again, a bankruptcy judge can approve a reorganization which will allow that to happen. If not, they are liquidated. It’s not a fire sale – it’s a very methodical and measured process.
I was a (very) minor player in one of the largest and most successful reemergences from bankruptcy in US history, with MCI/Worldcom. The process worked then, magnificently. Here’s what the bankruptcy judge said about the process then, upon our emergence:
“The proposed settlement is not only fair and reasonable but as good an outcome as anyone could reasonably expect in these difficult circumstances,” said Judge Rakoff’s. “The court is aware of no large company accused of fraud that has so completely divorced itself from the misdeeds of the immediate past and undertaken such extraordinary steps to prevent such misdeeds in the future.”
At the time, this was the largest emergence from bankruptcy in history – although if GM files, it would surely be larger. Still, MCI had it’s own set of complexities – remember, this was a company trying to rebound from fraud of historic proportions. Heck, Sarbanes-Oxley was practically written for MCI (and Enron)! (That abortion of a law is a whole other subject.)
My point is not so much to compare the two, but to simply state: If MCI can do it, GM can too. And if they can’t, they should be liquidated. That’s what would have happened to MCI had we not pulled it off.
And now, almost $40 billion in to the auto bailouts, after forcing out the CEO of one of the largest companies in the world, that’s what the Obama administration has apparently decided upon as well. But, they made sure they grabbed as much control as they could first. Instead of simply letting the process work, and allowing GM and Chrysler to go into bankruptcy initially, they now have the power to force out CEOs and Board of Directors, and are actively striving to make the UAW part owners of the company before all is said and done.
As Myhraf, of The New Clarion, says, “If the state is firing CEO’s and telling businesses how much in bonuses they can get, how is this not fascism? At what point does a mixed economy that is heading toward fascism actually cross the line to fascism?”
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