Make Money by Losing It!

Don King (the flamboyant boxing promoter) used to say, Only in America – by which he meant unlikely success stories. But America has changed. It is now a country in which CEOs are paid extravagantly to fail. The latest example being the $27 million annually that will be paid to Ford’s CEO Jim Farley – a roughly 11 percent increase in compensation. Never mind the $20 billion Ford has lost – so far – under his tenure as CEO as a consequence of his dogged commitment to malinvesting in battery powered vehicles.

It’s similar over at GM, where CEO Mary Barra is paid similarly – and so are the losses.

This is nice work – if you can get it. The thing is, only a few can get it, the car company CEO gig being something on par with becoming an NFL quarterback. The difference being the quarterback is expected to perform and if he fails to do that, he gets traded or let go. But then, pro football is still a proper business in the sense that it still relies on making rather than losing money.

What’s gone awry in the car business is that it is oriented toward making the government happy. This is especially true as regards both Ford and GM ever since the bankruptcies (and near-bankruptcies) that happened back in 2008 and 2009. GM did go under but the government “saved” it, with monetary interventions – using our money, it bears saying out loud. The thing is, when you buy something, you generally own it – and that’s basically what happened. GM became something like a de facto subsidiary of the government. It understood who was boss, to put it in plainer language. Also who is its chief customer, if you want to put it even more plainly. Ford saw – and understood.

If you understand that, then you understand why Ford and GM continue to double-down on this EV Business; i.e., this money-losing “business.” And you understand why they are personally rewarded with tens of millions even when this money-losing is in the billions. They are not worried about bankruptcy because they know Uncle is always there to help.

If this is “capitalism” then Bruce really is “Caitlin.”

The problem is similar, too – in that both are destructive parodies. Even with the best of intentions, someone being paid $27 million in one year (Barra gets closer to $30 million in one year) is someone who almost necessarily cannot relate to people making around $60,000 per year – such people being the bulk of the people who buy new vehicles. For Farley, a $60,000 EV is what a $6 four pack of Chef Boy R Dee spaghetti and meatballs is to a person making $60k a year.

Consider: When Henry II was running Ford in the mid-1960s, his salary was around a quarter-million annually.  As in one quarter of one million dollars. Adjusted – as the banal saying has it regarding the devaluation of the buying power of the dollar – for inflation, Hank the Deuce was paid around $2.6 million annually. This was at a time when Ford was making money as if it were confetti because it was making cars like the first-generation Mustang that sold in the millions. Ford also beat Ferrari during this period (if you haven’t seen the recent movie about this, you ought to).

Now – today – you have the current CEO of Ford being paid something in the neighborhood of ten times as much – in real (inflation-adjusted) dollars to lose more money than Ford was earning back when Henry II ran it.

This disconnect between accomplishment and reward is the sort of thing Marx wrote about that – as he saw it – would lead to the eventual extinction of capitalism. Or at least, the warped and ugly thing it has become.

Most people do not begrudge the recipient of an honest dollar – or even millions of them. Indeed, most people would like to be successful to that extent. There is nothing morally objectionable about that. Come up with something – an idea or a product – that people like enough to buy it at a price that makes a tidy profit and everyone’s happy. People who bought those first-generation Mustangs loved them and certainly didn’t hate Ford for making them. They were grateful to be able to buy them. And – for his part – Henry Ford II understood the wants and needs of the mostly working and middle class people who bought those early Mustangs, in part because although he was a rich man, he wasn’t a man disconnected from reality. Yes, he wanted to make money. But he wanted to earn it, too – as by whoop-assing Ferrari at Le Mans as well as every other brand in the showroom.

That was capitalism.

What we have today is something very different.

. . .

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