Monday, January 26, 2009

What Do They Win, Rod?

Just in case you missed this small but interesting piece of news, Citigroup today verified that they will shortly be accepting the delivery of a $50M private jet. But it's OK, because if they didn't take delivery of the jet, they would have to pay a penalty of a couple million dollars - plus, then they wouldn't have a jet!

Understandably, our Congressman Carl Levin is more than a little bit upset about the fact that Citi is going to be bringing this new toy into the corporate enterprise. It's not a long walk to comprehend his (and my) displeasure. You see, Citi has thus far received $45B in federal funding with zero to negative strings attached. That's one financial institution taking hold of more than 2x the taxpayer money currently supporting GM, Chrysler, and the corresponding jobs. For the time-being, this money is a blessed gift to our auto companies and our state has not yet collapsed mostly because of it, but it burns immensely that the executives of these companies were publicly and embarrassingly punched in the face over and over again for flying on their jets to D.C. It was a fantastic opportunity to publicly ridicule these men and the industry they represented. Despite this, though, Citi is going to stick its middle finger just a little higher into the air toward the U.S. from the comfy chairs on their new airplane.


Nick said...

Believe it or not, aviation departments can save a LOT of money. Yes, I fly planes so it's something that affects me directly. Ford Motor Company was saving millions of dollars yearly on their in house airline shuttle.

It's quite hypocritical on the government's part to allow TARP companies to utilize private aircraft after specifically banning the use by the automotive bailout, but eliminating the use of those planes which truly do allow things to be accomplished quickly in a fast acting economy is what is going to be the result of this lambasting in the press. Citiflight will shut down, and 50 or so more people will lose their jobs. They are selling two $27 million planes in order to purchase the $50 million one, and have already laid off a number of individuals. They are becoming a leaner department, something the Ford and GM aviation departments were going to do, but they were forced out of aviation by congress and the media.

Both of those companies haven't stopped traveling on private aircraft, but they're forced to charter them, which costs significantly more than utilizing their own.

Ken said...

I have heard many arguments about the benefits of private aircraft flight for executives of large corporations. Some of these arguments are as straightforward as calculating the $/hour salary of the executives and how stupid it would be to apply this to time waiting at the airport.

I'm not trying to argue for or against private flight, but rather I find myself frustrated by the public insult suffered by the auto execs for the purposes of a show trial. Of course this issue was largely irrelevant to the larger debate at that time, but it became the tentpole issue for all critics of supporting automotive support.

Nick said...

I agree completely, Ken. It is appropriate to see other companies suffer the same pains as the automakers.

More info. Appears they aren't taking delivery after all.

"Citigroup says no plans to take new $50 million plane

Tue Jan 27, 2009 9:15am EST

By Dan Wilchins
NEW YORK (Reuters) - Citigroup Inc, which received a massive taxpayer-funded rescue last year, canceled plans to buy a $50 million executive jet after news of the new plane drew rebukes from politicians.

The bank is under heavy pressure from regulators and elected officials after receiving $45 billion of capital from the U.S. government last year, including a $20 billion emergency infusion in November.

On Monday, Citigroup said it was going through with plans to buy a $50 million jet, which a person familiar with the matter said was a Dassault Falcon 7X. The bank said the new plane would cut its costs and it was financing the purchase by selling older jets.
But on Tuesday, a spokesman said Citigroup has no intention of taking delivery of any new aircraft.
Citigroup had ordered the executive jet in 2005, and was scheduled to receive it later this year. The bank said on Monday that canceling the deal would force it to pay millions of dollars of penalties.
The jet quickly became a lightning rod of criticism. A White House spokesman said President Barack Obama does not believe "that's the best use of money" by companies receiving taxpayer assistance.

Sen. Carl Levin, a Michigan Democrat, pressed the Treasury Department to block the sale. "To permit Citigroup to purchase a plush plane -- foreign-built no less -- while domestic auto companies are being required to sell off their jets is a ridiculous double standard," Levin said. Detroit-based General Motors Corp and Chrysler LLC were barred by the Bush administration from operating corporate jets as part of their December bailout.

I actually agree with Levin in the bolded portion."