This Can't Be Happening!

You might imagine that, even if they didn’t give a rat’s ass about their employees, the managers of General Motors would at least feel an obligation to show some solidarity with the beleaguered bondholders and shareholders of the company that they have so effectively run into the ground.

Aren’t captains supposed to go down with the ship, or at least wait until all the passengers and crew have been safely offloaded?

Apparently that ancient ethic of leader responsibility doesn’t extend to captains of industry.

Instead, with the once biggest corporation in America and perhaps the world, General Motors, now shriveled down to a point that its market capitalization (share price X number of shares outstanding) now stands at just $685 million, putting it below the average market cap of $879 million for companies in the Russell 2000 Small Cap Index, and with the stock price sinking faster than a flounder lure, GM executives, including Vice Chairman Bob Lutz, Vice Chairman Thomas Stephens, and Group Vice Presidents Carl-Peter Forster, Ralph Szygenda, Gary Cowger and Troy Clarke have sold their holdings on Friday and Monday. Lutz, according to company filings, sold all of his 81,360 shares of GM at a $1.61/share price for a total of $130,990. The six top executives together sold a total of 200,000 shares.

Talk about rats fleeing a sinking ship!

Clearly these once-pompous executives were thinking of the fact that if, as seems increasingly likely, GM goes into bankruptcy, its shares would fall to zero value or close to it. But these are fabulously wealthy men, not elderly pensioners, and you’d think that they’d have been willing to eat a loss of a paltry few tens of thousands of dollars in order to stand in solidarity with the stakeholders of the company—the employees, the bondholders, and the shareholders--through its hard times. Really, after all what’s $130,999 to someone like Lutz, a former president of Chrysler (he oversaw the introduction of the Viper and Prowler there) and a vice president at Ford (where he introduced the Sierra and Explorer lines), and a guy who pulled down a cool $6.9 million in compensation from GM while the company was tanking last year?

Now that GM is smaller than the Otter Tail Corp. (a mini-conglomerate based in Fergus Falls, MN that boasts a market cap of $709 million), and about one-fifteenth the size of Starbucks, one can understand that a man who once famously called global warming “a crock of shit” and said hybrids “don’t make any sense,” and who in recent years was touting bigger engines as GM’s salvation, might want to walk away from it all, and not be reminded that he once ran the place, but still, the idea that he’d sell his shares at this point?

Let’s recall that the workers at GM are being asked to give up $10 billion of the $20 billion that the company owes their health care trust fund, which under the circumstances means— putting that $10 billion at total risk. Shareholders, for their part, are being asked in a proposed rescue deal, to see their collective holdings reduced to a 1% share of the company. Even bondholders are being asked to forgive $27 billion in debt in return for a 10% equity stake in the company—equity that could be reduced to nothing if the company later went into bankruptcy.

But the executives who have worked out this proposed rescue “deal” are having none of it. They’re cashing in their chips now, while there’s still something to cash.

It’s a sorry spectacle that is worth remembering the next time somebody tells you that you need to be more “businesslike,” as though that’s some kind of model behavior we should all be emulating.