All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Channeling his inner Russian emperor, Pay Czar Kenneth Feinberg's compensation edict shook top executives at some of the nation's biggest banks. The Special Master will cut the cash component of salaries for the top 25 earners at the companies he oversees - AIG, Bank of America, Citigroup, Chrysler, Chrysler Financial, GM and GMAC.


How big a deal is this? First of all, we're talking about 175 employees, so let's not leap to "compensation is changing forever!" And Feinberg is not cutting total compensation, he's changing the composition of pay packages - less cash, more stock with longer vesting periods. In other words, the top guys will have more skin in the game.

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The wiseacres had a field day after word circulated about a Bloomberg News interview in which General Motors' new chairman, Ed Whitacre acknowledged knowing nothing about the auto industry.

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Edward E. Whitacre Jr has been appointed as the new chairman of GM and will take post after the company emerges from chapter 11, despite admittedly knowing nothing about cars.

"I don’t know anything about cars," Whitacre, the 67-year-old former chairman of AT&T, said yesterday in an interview with Bloomberg News after his appointment. "A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same."

But there has been concern in some quarters over his ability to lead the nation's biggest auto company out of bankruptcy. According to the Associated Press, Telecom industry analyst Victor Schnee called Whitacre's appointment "bizarre." Although Schnee admits that Whitacre has accomplished a great deal, he does not have much confidence in his ability to run GM better than previous management.

However, others seem to be more positive in the new appointee. "GM is not now about just making cars," Jim Hall, an auto industry consultant and former GM engineer, told Bloomberg. "It's about re-creating itself as a 21st-century car company. They have to have somebody at the top that understands they have to make a new GM.

Michael Robinet, an automotive analyst at CSM Worldwide Inc. told Bloomberg, "Let’s face it: The chairman is not necessarily operational… The chairman is about ensuring a strategy is followed."
GM's interim chairmen Kent Kresa said that Whitacre was "an excellent choice" after being recommended for the position by Steve Rattener, one of President Obama's senior automotive advisers.

“We need to bring back the confidence of the American public in this company,” Kent Kresa, the automaker's interim chairman, told the New York Times. “Having a strong board is a big piece of that.”

Russian President Dmitry Medvedev on Wednesday compared Russia's economic woes to those of the United States – albeit on a smaller scale – and while (presumably) trying to avoid lecturing U.S. policymakers, Medvedev did offer some stark contrasts to the way the U.S. has handled the current economic crisis.

Medvedev appeared on CNBC's "Closing Bell With Maria Bartiromo."

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General Motors isn't worried about Chapter 11. All they're focused on is "Chapter One."

At least that's the message the automaker is hawking in its new 60-second ad set to begin airing Wednesday.

The spot, heavy on sports imagery and self-effacement, centers on the theme of reinvention – the new GM's goal after it emerges from the bankruptcy process it entered into Monday.

"Let's be completely honest. No company wants to go through this," the ad begins.

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Fresh off the government's forced bankruptcy of General Motors, the failed automaker's CEO said he is both an optimist and a realist.

"We're open for business," Fritz Henderson told The Early Show Tuesday, adding, "customers can feel very confident" in the company honoring its warranties.

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President Obama announced today that his Auto Task Force helped General Motors produce a plan for the company to "move toward profitability" and "start building a larger share of its cars here at home, including fuel-efficient cars."

To many observing the government's control over the auto maker, however, those goals do not necessarily align.

"GM wants to make money, but making green vehicles is a totally different object," said Dan Ikenson, associate director of the Center for Trade Policy Studies at the Cato Institute, a free market think tank. "The government has to decide -- do we want it to be a profit maximizing business, or a tool of policy?"

President Obama has made the promotion of a "green" economy one of his top policy priorities, and Congress is facilitating his agenda with a plan to put a price on carbon. The government’s majority share in GM presents an opportunity, some say, for the administration to help an ailing industry while pushing green initiatives. For others, however, the government's obligation to see major car manufacturers through this economic storm means taking a more measured approach to "greening" the auto industry.

"There's two elements to rescuing the American auto industry," said Daniel J. Weiss, director of climate strategy at the liberal Center for American Progress. "There's the short term effort to keep them from drowning, then there's the long term effort of building a boat to get them to where they want to go."

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This story was written by Prerana Swami and Anna Aulova.

Although GM announced less than 24 hours ago that it would file for bankruptcy, the debate over governmental involvement in one of America's largest auto companies has long been raging online.

As far back as November 2008, NYU Law Professor Michael E. Levine was calling for bankruptcy for the company in the Wall Street Journal, stating that it was the best option for the auto giant.

"GM as it is cannot survive without long-term government life support. If it gets that support, it can't change enough and won't change fast enough," Levine wrote."It's the only option that merits public support and actually has a chance at succeeding.”

After the announcement Monday, many took to the blogs to express their views and their hopes for the auto giant.

In an editorial for the Huffington Post, the Michigan-born filmmaker Michael Moore bid a farewell to GM 20 years after his documentary "Roger And Me," which detailed Moore's efforts to confront then-GM CEO Roger Smith about the closure of a plant in Flint, Michigan, was released.

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David Hancock is home page editor for CBSNews.com.

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You keep reading about the GM bondholders holding out, slowing up the works, gumming the wheels of progress. Ninety percent of us must agree by May 26 to a swap deal for GM common stock or else the company files for bankruptcy. Forget bloated union contracts, foreign competition and decades of decline -- it's the bondholders that will drag down GM. Unless we take one for the team.

It's a real hustle down the aisle for a deal that, as a former Miami resident I can say, blows like a hurricane. And though Chapter 11 bankruptcy seems unavoidable, weary bondholders -- it's been a rough ride, people -- are expected to leap in front of each other to swap out our notes for stock shares that may soon be meaningless.

Oh yes, there's also an under-publicized 1-for-100 reverse stock split attached to the offer. And the company rounds down each fractional share while converting your notes. The well-publicized 225 shares for ever $1,000 of principal actually ends up being two shares. Two shares, not 225.

Such a deal!

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The thing that strikes you about these car company press conferences is all the manufactured enthusiasm. Arrayed before us at an idle Ford SUV and truck plant on this occasion were the leaders of Ford, the leaders of Ford's unions and the governor of Michigan, Jennifer Granholm, who seemed so energized she was practically doing handstands. I get it that Granholm and these car salesmen want the audience of journalists to buy into their optimism about Ford, but they really take it overboard.

Yes, this plant — idle since November — will soon be retooled so it can start producing smaller, greener vehicles including an all-electric version of the Ford Focus. Yes, Ford seems better positioned than any of the Big Three to make the pivot from gargantuan Navigators and Expedtions to more economical models that get good mileage without sending a black cloud of pollution everywhere they go. So, yes, Ford deserves a pat on the back for heading in a direction many consumers appreciate. (That bit about consumer appreciation for smaller cars is evident in the many, many vehicles that Japanese and Korean automakers produce and sell in this country. Would that Ford could produce cars of similar quality.)

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