"There are some defeats more triumphant than victories."
Michel de Montaigne (1533 - 1592)

The hearings on loans to automakers held recently in the House Committee on Financial Services proved a number of problems few anticipated, including those testifying.

While the members of the Committee were generally sympathetic and will probably be forthcoming with some reasonable proposal, it was quite interesting to hear Rep. Paul Kanjorski (D-PA), Chair of the powerful sub-committee on Capital Markets asking Richard Wagoner of GM just how much money GM would need until the end of March, 2009.  Watching Mr. Wagoner squirm and writhe in his seat trying to come up with a sensible and reasonable answer for which he was clearly ill-prepared justifyably angered Mr. Kanjorski and other members of the Committee.

The automakers have developed government-like bureaucracies which clearly have failed in their fundamental responsibilities to protect and serve the company. An example of our statement is the fact that they have huge accounting staffs, chief financial officers, economists and management consultants and analysts, yet when asked for a number by Mr. Kanjorski, the reply from the head of General Motors came across like a schoolboy who didn't do his homework the night before a test.

"There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses," Rep. Gary Ackerman (D-NY) informed the CEO's of Ford, Chrysler and General Motors.

When Brad Sherman (D-CA) spoke, he too expressed considerable angst at discovering that this group of auto executives flew from Detroit to Washington on a private jet at a cost per passenger in excess of $20,000. Mr. Sherman asked those in the room who flew in on commercial jets to raise their hands then saying "let the record show no hands went up." All that ridiculous expense while they're coming to Capitol Hill, hat in hand, seeking a bailout or loan.

What on earth could these people have been thinking? Didn't they think that this sort of thing is being deeply scrutinized by Congress and the media and that they'd look fundamentally incompetent for doing such a thing? Couldn't these executives, allegedly with management skills, conceive the notion that it would look selfish in the extreme and throw public sentiment against them, particularly when they need the public's confidence most? Can any of these CEO's spell "DUMB"?

It is said the three automakers have an excessive supply of inventory. What they lack is a fair and decent supply of brain cells among their top leadership. They came to Washington poorly prepared, inadequately briefed, incapable of answering the most essential questions and still, asked for taxpayer money in the billions, while wasting millions in the bargain.  Didn't they think of the impact their decision to fly on private carriage would result, potentially, in the loss of millions of jobs and thousands of businesses interdependent with the survival of these three?  Clearly not.  

This storm for Detroit has been brewing for years, and is not an immediately new problem, yet these same executives failed to see the actual Main Street economic conditions and prepare for the coming storm. In the meantime, their economists and CEOs do television interviews talking about how great they're doing and what wonderful new products they have.

So why, we ask, are American made cars worth less than their foreign counterparts also made in the US, in the secondary markets? The answer is just slightly less simple than the thinking of the company management - because they cannot plan properly for their market, production and longevity.

As for the bailout, sentiment on Capitol Hill seems to be swaying like a leaf of grass in a hurricane, which is not necessarily a good thing.

We were asked on Tuesday to formulate a financing model to help them, which was published on this website today, under Finance. However, given this total lack of forethought, we begin to wonder if the sum requested is sufficient to tide the companies over, particularly hearing from Mr. Wagoner that GM alone "go[es] through $5 Billion or so a month".

Do they really believe this economic depression will really be over in a matter of two or three months? Or even six? Can they really be that naive?

If the automakers are to survive, that kind of management has to end and those senior executives who made such unquestionably stupid mistakes simply must go, forthwith and without delay. They must be replaced by a strong, professional management team, with the common sense to avoid the pitfalls of bureaucracy.

It's a precept of Parkinson's Law that an official wants to multiply subordinates, not rivals and; they make work for each other. Dr. Parkinson correctly theorized that expenditure rises to meet expectations of income. However, where Detroit automakers went wrong was simply that they failed to see the decline in income and decrease their expenses accordingly and in fast pace.

We still believe that most of the present problems faced by the three companies are not their fault, owing to the astronomical level of issues being created by the lack of liquidity. That being said, the management of those companies have placed themselves and their firms in an untenable position by their own foolishness and lack of preparedness.

It is doubtful, from the words we're hearing from Capitol Hill that any plan to help Detroit's big three will be possible with the present management remaining in place. They've collectively insured that Congress will place government officials on the boards of all three and signed their own termination papers, without golden parachutes, for their incompetent planning of this journey to the Nation's Capitol.

Messr's. Kanjorski, Ackerman, Sherman and others on that Committee were clearly being ever diligent in their zeal to protect the American taxpayer from such excesses and proved, without fail, that change is fundamentally requisite at the top of all three companies. Kudos to the entire Committee, in both parties, for bringing to light such issues.