Hucksterism at Delphi.
Delphi CEO Steve Miller is proposing sweetheart severance packages for 21 top executives and improved compensation for 600 executives in the form of stock options. That is a raid on bondholders and should be disallowed by the bankruptcy court.
Those top managers bear considerable responsibility for Delphi's sad situation. As the airline industry demonstrates, extra pay for failed managers will do little to improve their performance. There is no reason to believe, as Miller claims, that those executives are being paid less than they are worth right now. In fact, they are likely not worth what they are being paid.
When companies are in long-term decline, the shareholders would be best served by managers selling assets and distributing the cash to the stockholders. Instead, profitable assets are sold to sustain employment and above-market salaries and to keep uncompetitive activities going.
Consider Ford's sale of Hertz and GM's sale of its stake in Fuji Heavy Industries. If you had a billion dollars to invest, would you give it to Bill Ford or Rick Wagoner? Of course not!
It follows that shareholders should not let them sell Hertz and Fuji and invest the money in Ford and GM, because they are not really investing. They are using the proceeds to support inefficient enterprises and overpaid managers and workers a bit longer.
The stock market is valuing down auto companies and their suppliers because it understands that, as a group, their assets are worth more dismembered and rearranged than in their current amalgamations. The industry has too many auto companies, too many suppliers, too many executives, too many engineers and too many auto workers
Miller's management compensation proposals are wholly irresponsible.