NU Online News Service
American International Group Inc.’s top executive says 70% of the company must be sold off to repay its federal loan.
“We’re the only company that’s been helped by the federal government that has a plan to pay back every single penny that has either been loaned to us or invested in us,” AIG chairman and chief executive officer Edward Liddy said in an interview on CNBC’s “Squawk Box.” “To do that, we have to sell 70% of our company. About 75,000 of our employees will end up working for someone else.”
The remarks came in response to a dust-up over AIG’s payments of retention bonuses to employees, which have ranged from a few thousand to millions of dollars.
Liddy has come under criticism for the payments from members of Congress, most vocally Democratic Maryland Congressman Elijah Cummings. Last week, Cummings accused Liddy of trying to disavow the payments while he was making them. The congressman was particularly upset with a letter he said he received from Liddy claiming less than 200 people would receive the bonuses, when in fact the figure would be closer to 2,000.
Liddy said retention bonuses are necessary to keep valuable people in their positions. because without them the companies AIG plans to sell would be worthless.
“If you don’t use retention bonuses, those people are some of the best in the insurance industry,” he said. “They will go elsewhere, and we won’t have anything to sell or we won’t get the kind of value that we need.”
He said the company is being inundated with requests for information from Congress and that AIG officials plan to sit down with Cummings after the first of the year and discuss his concerns. He added that he believed the company has been transparent, revealing all its moves in press releases and government filings.
Liddy said he hoped the loan could be repaid in 2009. AIG has been stabilized, and is in phase 2 of its plan to sell assets and pay back the loan, he added.
“We are going to be one of the company’s that distinguishes itself,” Liddy said, adding, “116,000 people at AIG did not cause this problem. They are going to solve the problem and sell our assets. We’re going to pay back [the loan.] That’s our goal.”
In response to an interviewer’s comment, Liddy suggested the federal government is interfering with some of the company’s purely business decisions. He noted that some moves the company has been forced to make, such as not running seminars at posh resorts for independent agents, will only undermine its marketing position.
“Over time that will hurt you,”. Liddy said. “An independent agent can sell your product or someone else’s.”
He said there might come a time when executives will have to stand up to Congress to defend its marketing decisions. But for now, “the better part of valor, I think, would be to sell our good assets at good values and pay down that debt so we can get back to running our business the way we want to run it,” he said.
Asked if the company would need to borrow any more money, Liddy said that would depend on the direction in which the capital markets go.
“If they stay where they are or get better, we’ll be fine,” he said. “But if the capital markets and credit markets were to continue to deteriorate, its anybody’s guess as to what would happen.”
He added, “But I like where we are, and I think we can get done what we set out to do.”