My daughter called me this morning upset because President Obama’s administration, and the President himself, had forced Rick Waggoner to resign as Chairman of General Motors, and is forcing Chrysler to combine in some way with Fiat, as conditions of funding the bailout requests of the two companies.
It is easy to see her point – how can the federal government dare make decisions normally left to Boards of Directors. Do they even have the right?
It is also easy to see the other side of the question – the side I come down on.
Banks with loans to failing companies often refuse additional loans, or cancel existing ones, until the company shows evidence it can repay them. Often banks will tell Directors to hire a turnaround team to fix the problems. With the prospect of failure in sight, most companies do as the banks request. This seems exactly the situation with GM and Chrysler.
As I read in the papers, neither GM or Chrysler has developed a suitable business plan for fixing their troubles.
Now is the time.
Now they are saying to either make the changes or accept the consequences. The administration has ignited a fire under the managements both companies.
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