The writer is a Los Angeles freelancer and former Detroit News business reporter. This column first appeared on his blog, StarkmanApproved.com.
By Eric Starkman
It’s a wonder if any American, particularly one who pays taxes and cares about how their government squanders their money, could look at the chart below and not be alarmed, angry, and concerned about the current state of leadership in America.
The chart, posted by the UAW in response to Ford CEO Jim Farley going on CNBC and implying the union is greedy in its contract demands, lists the compensation of the leaders running the world’s biggest automotive corporations. I’ve been railing ad nauseam for some time about the compensation of GM CEO Mary Barra and Ford CEO Jim Farley, who respectively “earned” $29 million and $21 million in 2022, but my outrage was based on how the auto leaders’ compensation was excessive even by the obscene pay scales of American CEOs.
According to the AFL-CIO, chief executive pay of S&P 500 companies in the past decade increased by more than $5 million to an average of $16.7 million, while the average worker saw an increase of $15,460 to $61,900. Given their poor performances and the harm their ineptitude is causing EV adoption, there are no metrics I’m aware of that can remotely justify the pay Barra and Farley received.
My head spins seeing how Barra’s and Farley’s compensation compares to CEOs of bigger and far more respected automotive companies than GM and Ford. How can directors of GM and Ford justify Barra’s and Farley’s pay packages when Toyota only paid its CEO $5.1 million and Honda paid its CEO $1.5 million? Toyota’s revenues are almost equal to the combined revenues of GM and Ford, but more importantly the company is considerably more profitable.
The chart possibly contains a small error, as Farley’s previously reported compensation was $21 million, but even allowing for an unexplained extra million or so, his and Barra’s pay is so out of whack by prevailing global automotive standards.
Allow me to add a little more fuel to the fire.
Below is a chart compiled by Good Jobs First, an organization that promotes corporate and government accountability in economic development, which shows Ford and GM respectively rank No. 4 and No. 5 among America’s biggest corporate moochers, with Ford sponging $7.8 billion off U.S. taxpayers and GM soaking them for $7 billion.
Good Jobs’ list doesn’t capture the entirety of Ford’s and GM’s reliability on taxpayer funding.
Most of the electric vehicles Ford and GM sell are eligible for federal $7,500 tax credits as well as sweetheart state subsidies. This is money federal and state governments forfeit so Ford and GM can sell electric vehicles that most Americans can’t afford. The tax credits are even available for the EVs Ford and GM assemble in Mexico, where Ford proudly manufactures its electric Mustang and GM’s Chevy Equinox and Blazer vehicles are slated for production.
The Biden Administration has earmarked $7.5 billion to build a national battery charging network, a function that Tesla had the foresight to build for its vehicles. Although other EV makers will benefit from the infrastructure largesse, it’s another example of GM and Ford looking to U.S. taxpayers to shoulder their business burdens.
Good Jobs’ list also doesn’t include the sweetheart $9.2 billion below market loan that Energy Secretary Jennifer Granholm gave Ford from a fund intended to finance innovation. Granholm’s loan is for Ford’s $11 billion EV projects in Tennessee and Kentucky for which Ford also received financial benefits from those states. I’ve previously argued why Granholm’s loan to Ford has an extremely bad odor.
Admittedly, Barra’s compensation is obscener than Farley’s. She’s been CEO since January 15, 2014, so she’s entirely responsible for the sorry company GM has become. An apt title for a book about Barra’s leadership would be, “Honey, I Shrunk and Destroyed GM (and received more than $200 million for my efforts!)
Under Barra’s leadership, GM, which for much of the 20th century was America’s biggest corporation by revenue and profit, is a shadow of its former self. Barra sold the company’s European operations, and pulled out of Australia, India, Thailand, and other countries. GM was once a formidable player in China with a 15% market share, but the company’s slice of the world’s biggest auto market is about half and fast falling. GM was recently forced to slash the price of its electric Cadillac Lyriq in China because it wasn’t selling in the world’s most mature and discerning EV market.
Understandably, GM’s workforce is considerably smaller, with about 25% fewer employees than when Barra assumed command. Barra has moved thousands of jobs to Mexico, where GM has four production facilities and has emerged as that country’s biggest automotive exporter. I urge you to read this interview with an employee at one of GM’s Mexican plants, who said he is paid $33 a day and that plant workers endure horrific conditions, including being discouraged from going to the bathroom during their 12-hour shifts. One must have ice in their veins, or getting paid $29 million a year, not to feel compassion for these workers.
Barra has banked GM’s future on EVs, previously promising that by the end of next year she’d be selling more EVs than Elon Musk’s Tesla. Barra’s foray into EVs has so far been an unmitigated disaster.
The company in 2021 was forced to recall all its electric Bolts because of battery fire risks. Not surprisingly, there was limited demand for the Bolts when GM reintroduced them to the market the last year, which forced the company to slash the price of the approximately $34,000 vehicles by roughly $6,000. The Wall Street Journal reported that GM loses money on its Bolts, and not surprisingly, the company planned to stop making them. Barra has since reversed that decision but no doubt if GM re-reintroduces the Bolt, it will be manufactured in Mexico.
GM last year boasted that it had more than 70,000 orders for its electric Hummer, which the company hopes to sell for more than $100,000. GM was forced to put a sales freeze on the vehicles last fall because of a potential problem with water seeping into the battery pack. In the first six months of this year, GM delivered 49 EV Hummers.
GM’s rollout of its Cadillac Lyriq has been beset with issues, making Bloomberg reviewer Hannah Elliott’s warning last year that the vehicle wasn’t worth waiting for impressively prescient. The Lyriq has already received about a half dozen safety recalls and service bulletins, including for vehicles with improperly welded battery connections that could cause them to lose power, vibration noise, and software issues.
GM’s Cruise driverless taxis are causing havoc in San Francisco, and the city’s fire chief warned it’s only a matter of time before they cause a major accident. Even the tech media is critical of the company’s technology.
It’s a wonder that Barra has managed to hold on to her job, given GM’s dismal stock performance. The company’s stock closed at this writing at $34. It was trading at $40 the morning Barra took over the company more than nine years ago. It was once said that “What’s good for GM is good for America,” but what’s supposedly been good for GM these past nine years has only proved to be good for Mary Barra.
Farley was only named CEO in October 2020 and he inherited some deeply rooted problems from his predecessors, including serious quality control issues. Those problems have not only persisted but appear to be worsening.
Since January of last year, Ford has issued more than 100 safety recalls, many on late model vehicles that were assembled on Farley’s watch. Some of the recalls involve work done to fix earlier safety issues. There have been at least a half dozen recalls on Ford’s electric Mustang and the National Highway Traffic Safety Administration (NHTSA) last month opened an investigation into Ford’s handling of a June 2022 recall that affected nearly 49,000 Mustang Mach-E EVs.
Ford was forced to slash the price and offer low financing to unload its electric Mustangs and many first-time owners appear to have had regrets. The electric Mustang is the third slowest selling used vehicle in America, trailing only GM’s made-in-China Buick Envision and Tesla’s luxury Model S. Many of the electric Mustangs for sale have extremely low mileage.
From what I’ve read in specialty publications, Ford’s EV operating software pales against Tesla’s.
Farley likes to hear himself talk, so much so that he launched a podcast last year. Unfortunately, he is often clueless, and UAW chief Shawn Fain deftly exploited Farley’s poor judgment.
Farley went on CNBC Thursday and accused the UAW of making demands that are excessive and unfair to working Americans.
“A full tenured schoolteacher in the U.S. makes $66,000, some of the military or firemen make mid $50,000. This (UAW proposal) is four, five times, six times, what they make.”
As Fortune duly noted, Farley’s figures were exaggerated, not surprising given that Ford last year paid $19.2 million for making exaggerated claims in its advertising and falsely promotes itself as a “uniquely American company,” but suggesting the UAW is greedy when he’s paid more than 318 times what a school teacher earns shows just how deep in the clouds Farley’s head really is.
For Fain, his battle with the automakers isn’t simply a wage dispute. As impressively reported by CNBC, Fain wants to represent not just union members but also America’s embattled middle class, which the UAW helped create. There’s a lot of anger in America, and conservative media understands it, as evidenced by this Breitbart story written by a former Wall Street Journal reporter.
It’s a demonstration of Barra’s and Farley’s questionable judgments that they believed they could indefinitely enrich themselves and feed from the public trough while expecting their workers to accept less and less. Their failure to avert a strike could cost them and their companies dearly. If Barra and Farley had any sense of honor, they would resign.
We will see how this story plays out, but if history is any indication, CNBC might want to consider a segment on investing opportunities in guillotine manufacturing.
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