Numbskulls in Detroit: Part Deux
I suppose it should come as no surprise to anyone that as part of the auto industry bailout bill this week, Congress will require the Big Three to sell off their corporate jet fleet. This is, of course, payback for the stunning arrogance the CEOs of GM, Chrysler and Ford showed two weeks ago when they flew to Washington in leather-seated, pampered luxury, hats in hand, to ask Congress for bailout money. One wonders if it would have gone any differently if the executives had been PR savvy enough to have driven their own cars or flown the airlines in the first place.
Woulda, coulda, shoulda; the damage is done and it's likely to tarnish the very idea of business airplanes for business flying. Thanks to these guys, "fat cat" and "bailout" will be forever linked to the words "business aircraft." At this juncture, it's impossible to know what the next effect of that will be. I see two long-term impacts, one good, one less so.
The good effect is that if boards are smart about this, they'll carefully examine how their companies use business aircraft and get way ahead of the next stockholder meeting, where this seems almost certain to come up as an issue. It's really part of the larger question of executive perks and over compensation, which stockholders will also be asking about, I'm sure. Extracting that particular pound of flesh, Congress made Draconian restructuring of executive pay yet another condition of the bailout plan.
On the plus side, stockholders will—and should—look at the kind of abuses by CEOs that this sordid chapter revealed. For instance, it was widely reported that part of Ford CEO's Alan Mulally's benefit package included having the company jets fly him to Seattle on the weekends, where he maintains a home. What the board should have said is, sorry Al, the job is in Detroit. Buy your own weekend tickets.
On the downside, I'm sure that as the pendulum arcs through the inevitable over reaction, many companies will dump corporate airplanes that are genuinely useful. This will hurt both the companies and the biz aviation industry in general, across the board from airframe manufacturers, to avionics companies to FBOs. I think it's part of a sea change, but I don't think it was inevitable. Had these three CEOs been responsible and perceptive, this might not have gone down as it did.
The other downside worth mentioning is that Congress is proposing a federal "car czar" to oversee the industry. While I think it's hardly unreasonable to have someone in charge of how $18 billion in taxpayer money is doled out, the czar will probably be some political hack appointee who will make a hash of it. And personally, I'm not fond of the concept of government oversight of private enterprise, but that's part of the aforementioned sea change and, frankly, bad business decisions got us here so it's not as if these companies have been Wharton School success stories. (The more I think about this, the more I sound like I'm arguing that these companies should be allowed to fail. And actually writing it makes it sound even better.)
Meanwhile, I hear Rick Wagoner is offering a sweet deal on a really nicely appointed Gulfstream.