Ready or not, willing or not, the U.S. government is now in the automotive business.
With Monday's bankruptcy filing, General Motors is expected to emerge, in perhaps 60 to 90 days, as a new company in which taxpayers will hold a 60 percent majority stake. The White House also will control a large chunk of Chrysler stock as well, now that a federal bankruptcy judge in New York has approved the sale of the smaller automaker’s surviving assets.
While the reborn Chrysler will be run by the Italian automaker Fiat SpA, it’s a lot less certain who will manage the “newco” assuming General Motors’ assets. Will Treasury Secretary Timothy Geithner call the shots on key financial decisions? Will Energy Secretary Steven Chu banish the big Chevrolet Silverado pickup in favor of a 50 mpg minicar? Perhaps President Barack Obama himself will weigh in on the design of the next Cadillac crossover design.
Obama quickly tried to tamp down any such speculation, declaring: “What we are not doing, what I have no interest in doing, is running GM."
“GM will be run by a private board of directors with a track record in American manufacturing,” Obama said Monday. “The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.”
That position was generally well-received, though there are a few folks, particularly active environmentalists, who aren’t entirely pleased. There’s a generally poor track record for government intervention in the auto industry, though at times it can be critical to launch or save a nation’s car manufacturers.
Historically, there has been a vast gulf between Detroit and Washington. Starting in the 1960s, when GM controlled more than half the American market, the Justice Department’s antitrust lawyers actively tried — but failed — to split the automaker in two. And when various federal emissions, safety and mileage standards were passed, starting in the '60s, Detroit’s response could generally be described as active resistance.
So, it would seem to be a perfect time for Chu and his Cabinet colleagues to strike. Perhaps, but the 50 mile-per-gallon econoboxes debated by candidates Obama and Hillary Clinton last year, “wouldn’t sell,” insists Bob Lutz, until recently GM’s vice chairman and now a corporate consultant.
When you’ve got $50.1 billion invested in a company struggling to right itself, that’s not your focus, Lutz said. “The government would like the taxpayers’ money to come back out, and the best way to make that happen is to make us financially successful," he said. "I think the government is going to want us to build the kind of cars Americans want to buy.”
Can lawmakers really resist the impulse to meddle? Only a couple weeks ago, Capitol Hill lawmakers, led by Texas Republican Sen. Kay Bailey Hutchison, tried to force Chrysler and GM to back down on plans to eliminate nearly 2,000 car dealers. In the end, the Senate backed down, and it would be a challenge for the House and Senate to do much more, as things are now set up, then occasionally gripe and grumble.
That’s not to say a little interaction is a bad thing. Lutz praised the White House’s Automotive Task Force for “listening” to Detroit’s concerns, especially when compared to the supposedly pro-business Bush administration, which resisted calls for a meeting with Detroit Big Three CEOs until well into its second term.
It’s all a matter of degree. Perhaps nowhere is the record on government intervention more blemished than in Britain, where activist Labor leaders took control of virtually all of the nation’s car companies in the 1960s and '70s.
The results were poor, with brands like Triumph and Sunbeam vanishing, and even survivors, such as Jaguar and Rover, being mismanaged to the point that there wasn’t much left worth saving once they were again privatized. With rare exception, those that survived were so damaged they haven’t done much better since.
At the other extreme, the Japanese government carefully and effectively nurtured its auto industry, through its Ministry of International Trade and Industry, or MITI, helping transform it into a global powerhouse. China’s government is even more active in promoting the emergence of its own auto industry, actively determining the likely winners among the hundreds of car and truck producers that dot the country.
While that level of involvement is unlikely here, Detroit makers are hoping to see the White House remain more active — and conciliatory — than in the past. A senior White House official wouldn’t commit to making the Auto Task Force permanent, but it’s clear that the Obama administration sees Detroit’s makers as critical to the economy and the nation’s future, and won’t be quick to turn a deaf ear once again.
