The Economic Bailout: Who's On Top of the "Gimme List" This Week?

Dice The nation’s second largest bank in the nation, Citigroup, will cut 50,000 jobs in coming quarters and join a number of others in the growing “gimme group.”

It seems every time we turn around there’s another demand for hand-out money.

The world must have forgotten the cry at the Titanic: "women and children first!" But the people who are crying the loudest, “The Big Three,” are the same ones that accuse women and children of sitting with their kids milking the system. The only difference is this bunch is sitting in their limos telling the nation how we owe them.

The Auto Industry

Sure I know Detroit is in a mess; years ago upstate New York experienced the loss of GE, Carrier Air Conditioning, IBM, and others. It will never be the same. Nothing is. This is the problem. We hate to change, we want things to remain the same and be easy. It doesn’t matter, time marches on as they say and it will change whether we want it to or not. I heard in New Jersey this week there was a small-car rally. Did Detroit miss this?

It sounds like high-end welfare to me. If we bail these companies out, can we require their management to go to rehab and get new job skills? If we give them the bail out, do they have a plan to compete with Honda or Toyota? McDonald’s seems to be working hard at focusing on their customers. Can we require that the big three attend Hamburger U or seminars expounding on the The Toyota Way?

In a Wall Street Journal article this past weekend, David Yermack cites the following about a speech given by economist Michael Jensen in 1993 to the American Finance Association.

Mr. Jensen's presentation included a ranking of which U.S. companies had made the most money-losing investments during the decade of the 1980s. The top two companies on his list were General Motors and Ford, which between them had destroyed $110 billion in capital between 1980 and 1990, according to Mr. Jensen's calculations.

So if we don't bail them out, the world will go to hell in a handbag? It doesn't make sense. It feels like everyone screaming for the gimme is standing over us with a sledge hammer promising the end of the world if we don’t give them what they want.

State workers are upset because they’ve been asked to take a week’s vacation without pay, or that their copay on their insurance has been raised five dollars.

Tishman Construction, the largest construction company in the US, says they employ 20,000 more than the auto industry and that our infrastructure is falling apart, bridges and roads are in sad need of repair.  We know that’s true, but does that put them on the top of the list.

My own personal gimme: let’s go for the construction industry. Of course this is self-serving but aren’t all the gimmes self-serving? Let’s get in line.

It’s not the question of who needs it, it’s more of who will push the economy forward and how we hold them accountable for the money.

Sure I know that the city of Detroit is in a bad way, but can the big three fix that? It may not be fun but upstate New York had to move on when GE, IBM, Kodak and Carrier Air Conditioning cut jobs or moved on. Not great but the world has been changing, did you miss it? No more big trucks, we want small and green.

Hey what happened to the ninth ward in New Orleans? There are still sad homes with no inhabitants, numbers still on the door explaining how many people and animals lived there and how many died. Another mismanaged bailout.

I was there not long ago and the ninth ward is a still reminder of a gimme gone bad — and then forgotten.


Speaking about mismanagement, we wanted everything cheap and we got it. We’ve outsourced the skilled jobs to India, Manila and wherever else people work for peanuts. I really do have a hard time understanding the Delta agent and the Hewlett Packard rep. The last straw, however, is the technician from Time Warner Cable. Sometimes I get so frustrated I just hang up in the middle of the conversation.  Why aren’t these people located in Detroit or Las Vegas or New Jersey somewhere? Why are all the skilled people driving cabs in NYC and the jobs they are skilled for being done by someone way out of the country?

I’m afraid that when these people come around for their gimmes, the jobs will go out of the country.

Should Anyone Get Bailed Out?

So let’s go back to the real issue: who should get bailed out? Why would anyone bail out a business that was in the toilet, losing money and didn’t have a good business plan? I don’t know any bank that would give a business money without a product to sell, a way to sell it and a track record. I shouldn’t say that because apparently that’s one of the problems.

Free money, is it really free? In 1985 I wrote a grant which I submitted to the Charitable Venture Foundation. The grant was for a targeted group of women, to teach job skills and get these women back in society. My idea was to develop a pilot program for women who wanted to pull themelseves and their children out of poverty. I was told I was embarking on the first grant of its time: a live-in program that included job, education and emotional skills. It took me one year to get this grant, it was in the neighborhood of $140,000 and contained numerous stipulations.  I had to raise a matching amount of $140,000 worth of in-kind gifts as well as employ people with the skills to make this work.

I supplied an extensive business and marketing plan and was held accountable for every dime and reported monthly on my spending. An accountable gimmee. A lot of work – not a huge success. But movement forward may not have to be a huge success.

Getting Back to Basics

Before we do anything, how about some basic rules of business?

  • One, know your customer. If they want little “green” cars, build them. The new "rich" is green and eco-friendly. Rich is less about showing off and being big. I’m not in the car business but I can read and follow the consumer.

  • Have a plan. How will it work? Who will do it and what kind of track records do they have? How are they planning for the future? Do they have the skills for the future?

  • Know when it’s time to change. If your business doesn’t change it will be history.

  • “Know when to hold em, know when to fold em.” Good for poker and business.

  • Train your employees for the future; have them be part of the solution rather than the problem. What has GM been doing over the last 10 years?

Not much time to worry about how it all happened but we better be sure we have a better plan for the future

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