It might be time to alter the old saying, “What’s good for GM is good for America.” A more fitting statement might be, “What’s good for GM is what the president says is good for GM.” The problem is, the White House shouldn’t be running a car company.
The federal government’s strings-attached bailout of the U.S. auto industry is providing another strange wrinkle in these already strange economic times. President Obama this week turned his attention to the auto industry, and his actions are as decisive and clear as the other economic measures he has taken. The administration forced out General Motors CEO Rick Wagoner over the weekend and extended the company 60 days of financing. Chrysler was given 30 days of financing and a nudge toward merging with another company, possibly the Italian firm Fiat SpA.
The president said 400,000 auto-related jobs have been lost in the past year alone. That pain has been felt here in Maine: In Brewer, the closure of auto parts manufacturer Lemforder Corp. is imminent. His actions, Obama said, were aimed at avoiding having the car companies broken up and sold or locked up in lawsuits. Still, bankruptcy is an option for both. It would allow them to clear the decks of debt, at least temporarily.
And the pain isn’t all corporate. The related unions already are grumbling about the concessions they know they will be asked to make as the companies rebuild.
Just as a sports team often fires the coach for the failure of its players, Mr. Wagoner’s demise at GM may be more symbolic of a fresh start than deserved. Clearly, the U.S. auto industry must reinvent itself, and there are signs that this process is well under way. For its part, the administration must quickly move away from headlines about CEOs being forced out and toward clear benchmarks for success, which must be measured by jobs saved.
The federal government cannot function as a board of directors for private industry. A more effective role for it would be to offer financial assistance that is not open-ended. Mr. Obama’s action came because the Bush administration’s $17 billion bailout of GM and Chrysler required plans filed by March 31. The next deadline must come sooner.
When banks loan money to businesses, the bankers first want to review a business plan. They may make suggestions, but once the loan is issued, the bank generally does not make recommendations about CEOs, product lines and market strategy. But when taxpayer money is infused in a private company, such oil-and-water mixes are to be expected.
But the time has come to begin weaning corporate America off the government breast. There is no motivation like a deadline. If GM and Chrysler face complete divestiture by the time they introduce their 2011 models, such a timeline will begin to restore some real market dynamics to the auto industry. If GM or Chrysler are no longer recognizable by then, the market has spoken. Let it, not government, have the last word.