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Dec122008

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Corker for “Car Czar”

I received a note the other day asking why I have been writing less. No reason other than struggling with what to say that is different from what I have said previously. I remain captivated by the auto bailout talks and have quickly become a big fan of Senator Bob Corker, the Republican Senator from Tennessee. His preparation for the hearings is evident each and every time I see him speak. Unlike others sent to Congress that I write about here, Corker is working on behalf of the country by doing what he can to ensure that good money is not wasted on a bad business plan.

His grasp of the business gives me hope that those elected to Congress actually do more than pander to their constituents. On days when I cannot listen in, I stay up way too late at night just to make sure I hear Corker. And I am thinking that he should be the “Car Czar”.

I understand the risks on both sides of the argument. But excuse me: the government bailing out a private equity firm that owns both Chrysler and the majority of GMAC? This is just plain wrong. Cerberus made the play; they should also suffer the consequences if they are not willing to use any more of their funds to protect their initial investment.

This Blog and My Views

I actually had a comment sent to my most recent post suggesting I study the history of the auto industry and what it did for America during World War II. Please. The past is simply prologue for me. It provides context. It is the preamble to the need for change. I don’t care if that is the way it has always been done. When it is clear that the past is broken, it is high time to begin a process of ensuring that history does not repeat itself. If one of the Big 3 were to vacate the industry, there will be another innovator to fill the vacuum. And someone else that will build tanks.

I get to listen to, and read, a lot of happy talk about the way things should be in the labor-management arena. Happy talk that ignores the facts about an economic environment that is diametrically different from anything else we have witnessed. Those that read this blog and comment because they do not like to hear what I have to say suggest, under their screen names only, I have some agenda. I have no agenda other than a passionate want to see this industry succeed for all stakeholders and that includes employees and shareholders. If I had an agenda, I would not post all comments. I have a passion, so I write.

Increasingly I hear, and read, that pay rates and work rules negotiated in bankruptcy are somehow not the terms that establish the market for employees in the airline industry today. That too is happy talk. The inefficiencies embedded in the pre-bankruptcy/restructuring terms and conditions were reset by bankruptcy because they could not be sustained. Corker and his Senate colleagues are going to reset many remaining inefficiencies in the auto industry – and it is not just labor. Markets develop imperfections. Imperfections are ultimately corrected by some action and this underscores my belief in market mechanics.

Swelbar Is Biased and Coming Clean

I am not writing a news blog. If you want to read a story that represents balance through general reporting then pick up a newspaper without an op-ed section. This blog is opinion - based on a long time of witnessing events and studying underlying data. Terry Maxon writes the most balanced airline news blog on the internet today that invites commentary. But everyone has some biases and I have mine. Blogs probably won’t appear to have biases if you like what they have to say.

My biggest bias has to do with those that live in the past. Labor at American, United and US Airways generally live in the past and that is why I write a disproportionate amount about those carriers.

I know enough to know that labor is using executive compensation as a leverage grab because there is no other leverage to grab unless it is alliances; shot gun weddings with consumers; and the NMB because it does not work for you today but has been embraced in the past. With regard to the executive compensation issue, I am in agreement with many of labor’s concerns; particularly the symbolism it presents.

But at the end of the day, exec comp gets lost in the rounding. This is why I will not capitulate to the desperate grabs for leverage over the exec comp issue in my commentary. What about the two recent Merrill Lynch hires whose contracts say they are to receive $65 million for a sum total of 3 months worked? Neither of these two employees are the CEO.

Yep, I respect what Larry Kellner has done with regard to his compensation this year. Yep, I respect what Dave Barger has done as well – to name a couple. I wish there were more stories like these. Executive compensation really is the Board’s domain and people just simply fail to appreciate that.

Another bias I have is that I think union corporate campaigns – especially in today’s fragile environment – are destructive; accomplish little; and as a result are an incredible waste of member dues. When the American pilots finally get a contract, how much of that 3-5% annual wage increase can be attributed to the leverage generated by billboards and websites and hundreds of thousands of dollars of member dues? At United, how much of their contractual improvements will be attributed to the get rid of Glenn campaign? Very little. As for that loan is due site at Continental: I chuckle as the flying investment bankers did not negotiate terms of a loan as a quid pro quo for interim contractual relief.

Finally

I am really happy to see Gerard Arpey, and others in the industry, step out on the infrastructure issue. Without question, the infrastructure is the most important issue facing this industry in the years to come. It impacts so many cost centers for the individual airlines. It ultimately has an impact on the consumer’s views of the individual airlines that comprise this industry as well.

The fact that labor and management cannot agree to join hands in the pursuit of the most efficient aviation infrastructure possible boggles my mind. Ever think how many areas of a collective bargaining agreement are called into question because of block time creep? As block times creep, management is forced to ask for relief. Labor keeps saying you can do that under the agreement. Management knows it cannot because of an upcoming schedule change that will include even more block time creep. And round and round it goes.

Sadly, a majority of productivity relief sought by management is the result of government inaction on the aviation infrastructure. But no one is pointing fingers at the government. I guess no one points fingers because government worker compensation is not at risk?

If President Obama is going to be a good friend to airline labor, then the aviation infrastructure should be at the top of a list of infrastructure projects. This alone would go a long way to reduce friction between airline management and labor as efficiencies would be found without the need to ask for contractual relief. Honestly, the infrastructure is the one aviation project that would benefit each and every industry stakeholder positively.

Reader Comments (1)

I recently was in a limousine one of the clients that belong to my seo company turned up in it, so cool.

08.21.2009 | Unregistered Commenterseo company

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