Results tagged “bailout” from PR Needed Here

Granholm put on a clinic on how to handle the spokesperson role. If you've ever done it, you know how hard it is. Of course she was articulate and empathetic. But more than that, she framed the issue in a way that puts Americans - not the car companies - first. I suggest you click, listen and follow along. And learn. The interview runs just under eight minutes.

Here are Granholm's main points:

Frame it as an investment - the loan helps our economy, keeps people working, and helps the auto makers transition to a new economic environment with new (green) products.

Energy independence - the loan will help create American energy independence.

There will be blood - Granholm acknowledges that the auto industry is prepared to accept some downsizing, some loss of jobs. That takeway? The industry is sacrificing, just as all Americans are also sacrificing in this down economy.

Empathy - she shows acknowledges the pain caused by the transition in the auto industry. Many of the soon-to-be unemployed are Michigan residents.

Hang the problem on someone else - in this case, the financial industry, whose careless investments in housing have crashed, taking down the entire American economy. "We're victims, too."

Acknowledge past mistakes - shows humility, that the industry is capable of recognizing and learning from past mistakes.

Dire consequences - without the loan, it's "game over" for Detroit, says Granholm. It will also bring up to three million lost jobs on the industry. Again, mostly in Michigan.

Reiterate the key point - It's a loan, not a giveaway. Again, in contrast with the financial industry. She also brought up the case of Chrysler in the 1980s, which repaid its loan in full and with $300 million in interest to U.S. taxpayers. 

Granholm is better suited to taking the case of the auto industry to the hill because:

There are many reasons to take issue with loaning more than $35 billion to the U.S. auto industry. Kudos to Jennifer Granholm for effectively representing why the loans would be good for America.

It shouldn't surprise you to learn that the heads of the Big Three automakers flew to Washington on three private jets to beg for $25 billion in bailout money. A sensible person would ask: is this on message? Don't people judge you by your actions? Would it be so bad to fly commercial? At least couldn't they jet-pool?

Don't these CEOs have counselors on staff to avoid disasters like this?

Congressman Gary Ackerman (D-NY) noted a "delicious irony in seeing private jets flying into Washington D.C. and people coming off them with tin cups in their hands."

But this is the the U.S. auto industry we're talking about. These guys have built their careers running once-great marques into the ground.

It's hard to understand things like investments and insurance. But almost everyone owns a car. We all have long-standing relationships with automobile brands. We all know something about the auto business. For example, I know that I just replaced the transmission on my daughter's U.S.-made 2003 Ford Focus, conveniently just a few hundred miles out of warranty and a relatively young car at 61,000 miles. I know it cost me more than $2,000 to keep this economy car on the road for a while longer.

And here's what else I know: American cars are not the best. If you want the best, the market can easily sort that out for you. Just look and see what five-year-old cars are worth. According to a current study released by Automotive Lease Guide, the cars that hold their value best are made by Honda, Subaru, Volkswagen and Toyota. The worst? The LIncoln Town Car and the Chevrolet Uplander.

An anecdote to illustrate the above point. Chevy's new Malibu has received very positive reviews. I mentioned it to a friend who was considering a Camry. His response? "Yeah, that might be a good car to pick up off-lease." Translation: if I buy one new I'll get hosed. But if I wait and buy it used, I can pick it up at a heavily depreciated price. At that point, I might take a chance on it.

The Wall St. Journal recently noted that the U.S. automakers just can't catch the leaders. It cited the Honda Civic; the car costs several thousand dollars more than the Chevy Cobalt, and still sells in far greater numbers. But after a few years, more than the initial price difference is recouped in the residual value of the car. Bonus: this comparison does not factor in the Honda's superior reliability and driving experience.

Here's how the American car makers have lost our share-of-mind: they fought against CAFE mileage standards. They did this while drunk on SUV profits, which disappeared rapidly when gas prices took another hike. Faced with almost no strategy for making fuel-efficient vehicles, they have latched onto flex-fuel vehicles. But ethanol is a loser technology, and everyone, except for corn farmers, knows it. And I'm sick of hearing about the Chevrolet Volt. How long before GM gets this potential game-changer to market?

And the most egregious tactic of all? The job bank. As of 2005, more than 12,000 autoworkers were paid autoworker wages to show up at an abandoned K-Mart, to work crossword puzzles, read the newspaper or watch TV. It's a legacy of a 1984 concession the automakers made to auto workers. As their market share grew smaller, the auto companies were forced to keep workers they didn't need on the payroll. 

This is part of why Mitt Romney - the son of former American Motors CEO and Michigan governor George Romney - wrote in the New York Times, "Let Detroit Go Bankrupt."

Meanwhile, there are lots of good American cars to buy: a Honda, made in Maryville, Ohio. Or a Subaru, made in Lafayette, Indiana.

The PR lesson in all of this? You can't build good PR - in this case, consensus that the U.S. auto companies are deserving of a massive subsidy - on poor performance. These companies have failed to show that their business model has a chance to succeed. They've showed no humility. Their argument is basically that they're too big to fail.

But fail they will. And guess what? People will still need and buy cars. They just won't be buying those cars.

There's no helping a CEO begging for a $25 billion bailout who shows up in a private jet. The $25 billion, by the way, is to be paid by hard-working Americans who do not participate in the job bank. Americans who won't get a bailout of their own. Some of whom may be paying for a recent transmission job.

PR pro Shel Holtz has had it. He writes that the people running AIG are idiots. Dolts. Complete and irredeemable morons.

And I agree.

So what has this "confederacy of dunces" (Holtz's words) done with our money?

The company put the former head of its financial products unit, Joseph J. Cassano, on retainer. His salary? One million dollars a month. Former CEO Martin J. Sullivan, who ran the company into the ground, got a $5 million "performance bonus."

In October, just days after receiving the first bailout, the company spent $443,000 on an executive retreat in Half Moon Bay, California. Reaction to this event has been negative. And bipartisan. Barack Obama said the executives should be fired. George W. Bush's press secretary, Dana Perino, said AIG's behavior was "pretty despicable."

And now, ABC News' Brian Ross reports another lavish AIG resort getaway in Phoenix, this time only about one-third of a million dollars' worth. The most damning thing Ross presents is that the hotel staff was instructed to keep the so-called educational seminar quiet. No "Welcome AIG" signs here. The ostensible goal: to keep AIG out of the news.

The key values that need to be addressed here are honesty and transparency. If AIG is going to be a quasi-public company, it needs to do business in an honest manner. You don't need to be a genius to know this: good performance begats good PR. It's easy to tell your story when you've nothing to hide.

If you're going to sell high-end financial products to financial analysts, a luxury resort may be in order. But lying about it - failing to disclose publicly that it's your event - is wrong. It breeds mistrust. It hurts the company, both long-  and short-term.

AIG needs to entirely reboot its communications process. 

The company needs to operate in the sunshine. The company should hire - at the highest level - an ombudsman to represent its public ownership. This person would have to train the executives to operate under this new paradigm, and should have unfettered access to daily activities. This new approach would have to be practiced at every level of the company.

The company should publish its aggressive plans to pay back our $150 billion. It needs to proactively tell the story of its good stewardship of our money. It needs to show gratitude.

All across America, people are losing their jobs and companies are closing their doors. We're hurting. AIG needs to hurt, too. Its guests may enjoy the resort, but AIG employees need to sleep at the Ramada. Salaries need to be reined in and made public. Bonuses, which may be necessary to attract some top talent, need to be linked to actual long-term high performance, and they need to be deferred.

AIG has created a big hole to climb out of. We're provided a ladder. We should be cheering for their success. It's not such a far-fetched concept. 

Remember when Lee Iacocca became the voice of Chrysler after receiving a Federal bailout?

He gave a bravura performance as the conscience, the brains, the drive of the New Chrysler.

AIG needs its own Iacocca: someone to to talk to us, reassure us, and show the company's relentless effort to repay us for our faith in the company. This individual should probably be an outsider, someone with a stellar reputation, probably from a service industry. Perhaps a respected legislator or judge. 

The message needs to be, "no more business as usual at AIG. We're a new company with a new set of rules, and all that bad behavior is in the past." 

And then they have to do the work.

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Resources for discussion:

AIG website (includes video links of CEO Edward Liddy and a statement on the meeting in Phoenix)