A Little More On GM

In today's WSJ (link here for subscribers) proponents of a financing package for GM "have said they would seek to attach stiff conditions to a bailout package, including limits on executive compensation and additional requirements for the development of fuel-efficient cars. But they have stopped short of saying they would consider a management overhaul at the troubled Detroit auto makers or a massive cost restructuring" (emphasis mine).

I have a few, mostly rhetorical, questions:

Did executive pay and a product portfolio of fuel inefficient cars create GM's existential problem? Conversely, are lower pay and fuel efficient cars, by themselves, necessary or sufficient to get GM to sustainable profitability? If GM achieves sustainable profitability, will Congress involve itself in how the spoils are shared once the U.S. Treasury is made whole? If Congress doesn't promise to extricate itself from GM, won't management's decisions be influenced by its expectations of Congress' needs instead of customers' (e.g. they set aside capital for retiree benefits instead of R&D)? Will Congress' promises today be credible?

Thus the perils of political investing...

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