By Monica Frede
Significant waste exists in the current US health care system. This should come as no surprise.
An Associated Press article details a recent report conducted by the Institute of Medicine that found $750 billion in annual waste in the U.S. health care system, which means that for every dollar spent on health care, 30 cents is misused. The Institute found that waste existed in the following categories: unnecessary services ($210 billion annually), inefficient delivery of care ($130 billion), excess administrative costs ($190 billion), inflated prices ($105 billion), preventative failures ($55 billion) and fraud ($75 billion).
Can you imagine if such a report was written about the ROI (return on investment) of Bain Capital? Or for that matter, if any publicly-traded company detailed similar annual financial results to its shareholders?
In reality, we have President Obama promising to expand the government’s takeover of health care, making such bold claims as, “Here in America, in the wealthiest nation on earth, no illness or accident should lead to any family’s financial ruin,” and “insurance companies will no longer be able to discriminate against an American with a preexisting condition. They won’t be able to charge you more because you are a woman. They won’t be able to bill you into bankruptcy. If you’re sick, you’ll finally have the same chance to get the same quality, affordable health care as everyone else.”
These statements, the 2012 version of his 2008 “this is the day the rise of the oceans begins to slow” promise, reconfirms to the U.S. shareholders (taxpayers) that Obama’s contract should end. He is a man managing the government with little credibility, outlandish promises, and a poor track record.
What board of directors would allow a CEO to remain in place who has not lived up to his most basic promises (unemployment rates) while refusing to meet with and learn from his handpicked economic team in more than six months?
It is clear that we hired a man with no business acumen. By acumen, I mean a passing interest in company profits. And by acumen, I mean a man whose resume is devoid of any private-sector work experience. He has not so much as mowed his neighbor’s lawn or waited tables, which by all company standards, would not allow him to pass beyond the pre-screening questions in any job interview.
But he did. And we hired him anyways.
Since taking office, Obama & co became part owners in one America’s largest automobile manufacturers. But a recent Forbes article tells us that GM may be heading for bankruptcy yet again. This should come as no surprise, either:
“Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion. Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.”
Any CEO would be sweating under the collar to stand in front of his board with financials like this. But unlike most CEOs, the Obama administration wears two hats with GM: that of 26% ownership stake in the publicly-traded company, but also as the auto industry regulator through its National Highway Traffic Safety Administration branch.
Having a vested interest in the profitability of GM as well as regulator of its industry is both unrealistic and paradoxical. Another great standard for any CEO.
Dan Akerson, current Chairman and CEO of GM, detailed the clumsy bankruptcy process that GM underwent in 2009:
“Regarding an inherited bloated management structure at GM and the inefficiencies that went along with it, Akerson stated, ‘the good thing about our bankruptcy is that it took only 39 days. The bad news is that bankruptcy took only 39 days. If we had been there longer, people would have asked these questions and looked at these things.’”
Mark Modica, a National Legal and Policy Associate Fellow, went on to say:
“I have stated in the past that the Obama Auto Task Force which orchestrated the GM bankruptcy process relied on bankruptcy experts instead of auto industry experts when they restructured GM. Labor costs and pension liabilities were overlooked as the politically powerful UAW had its interests protected. The belief that an influx of $50 billion of taxpayer money and the removal of $28 billion of bondholder debt could permanently fix GM’s problems was a major miscalculation. The simplistic view that closing dealerships would greatly lower GM operating costs was also not accurate. Those realities are now coming to light as GM has about the lowest profit margins in the industry, despite all of the taxpayer help.”
Asking the tough questions? Overlooking significant issues? Protecting interests? Miscalculations? Again, the theme remains, this should come as no surprise. You don’t put a toddler in charge of walking a bullmastiff. You don’t ask the Taliban to create the abridgement of Locke’s Two Treatises of Government. And you don’t allow a community organizer to redesign a healthcare industry that consists of 22% of federal spending and control a 30% share of one of the world’s largest automakers.
Unless, of course, he promises hope and change. And then some more hope and some more change four years later.
The Forbes article details the gloomy outlook for GM. “In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.”
This hallmark company that peaked in 1965 with a commanding 50.7% of the U.S. market share requires leadership— the kind that translates words into actions. The kind that steps away from the teleprompter to get his hands dirty and turn around a floundering corporation, such as Staples, Bright Horizons or Sports Authority, to name a few.
Who do you trust to manage the country’s finances— an idea, or the brain trust of doers such as Jeff Bezos, Larry Ellison or Mitt Romney?
We are the shareholders, and our vote is coming.