The offer of the bosses of the main car companies in the US to work for $1 a year in return for federal assistance shows great political wisdom that has been sadly lacking amongst top bankers. It also shows a grasp of economic reality still sadly lacking in the financial sector.
The US car majors realise that they are paying too many people too much money to make too many of the wrong kind of cars. They need to cut the cost of each car they make, to stimulate sales by lower prices, and to match the competitive products coming from abroad. They need also to recognise the shift in customer choices and produce a new range of models more suited to modern American requirements in the age of sometimes scarce and dear enegry.
The bosses will deserve their $1 if they can pull off this transformation. Indeed, they would then deserve a bonus as well, geared to results and to getting out of federal support. If they cannot find a way to cut their costs and change their models at the same time – and it will be very difficult- even $1 could prove excessive. These companies now need great leadership capable of redefining them as leaders in the modern marketplace, and capable of delivering high quality goods at realistic prices. Politicians on the Hill were right to demand they sell their corporate jets and cut their executive remuneration before considering their request for support. It is just a pity the US and UK authorities did not take the same line with the top bankers who came seekng state aid in order to sustain their unrealistic levels of remuneration and comfortable corporate lifestyle. Instead the authorities in the Uk both forced them to raise equity capital more urgently than was needed, and then made it available to them without demanding the cost cutting you would expect in the circumstances.