Monday, March 30, 2009

The auto bailout mess

The U.S. government just got its pound of flesh:
The White House on Sunday pushed out the chairman of General Motors and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.
If you take the government's money then you better be prepared to play by the government's rules. But what a truly ridiculous situation we are in. The Obama Administration -- which has about as much experience running the auto industry as me, which is to say none -- finds itself playing the role of venture capitalist, dictating terms to the auto companies of what they have to do to get more government funds.
Mr. Obama’s auto industry task force, in a report released Sunday night assessing the viability of both companies and detailing the administration’s new plans for them, concluded that Chrysler could not survive as a stand-alone company.

...G.M., on the other hand, has made considerable progress in developing new energy-efficient cars and could survive if it can cut costs sharply, the task force reported. The administration is giving G.M. 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time.

...In a question and answer session at the White House on Thursday, the president said there had been “a lot of mismanagement of the auto industry over the past several years,” and declared that more government help would be contingent on the companies’ “willingness to make some pretty drastic changes.”
So we have the government determining which companies deserve to live and which deserve to die. Is it any wonder that this city is overrun with lobbyists? With that kind of power in government hands you would be a fool not to be contributing money to politicians and trying to influence the process.

In any case it is funny -- in a gallows humor sort of way -- to watch the bloated unwieldy behemoth that is the U.S. government telling others to slim down. This is a body that practically wrote the book on mismanagement and could stand to make some pretty drastic changes it wants to remain a viable entity. Where's its plan for restructuring?

Well, more details are set to be unveiled this morning. I have a sick feeling that the whole reorganization is going to be used to promote Obama's "green energy" initiative, with the auto companies forced to march in lock step. I hope I'm wrong.

Update: I'm right:
But I'm confident that if each are willing to do their part, if all of us are doing our part, then this restructuring, as painful as it will be in the short term, will mark not an end, but a new beginning for a great American industry -- an auto industry that is once more out-competing the world; a 21st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us towards an energy-independent future. I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars.
Unreal. Absolutely mind-boggling. And yet thoroughly predictable. Barack Obama, who has never worked in the auto industry, never worked outside of government, law and non-profit work, has never been in charge of really anything, is now determining the type of cars that our auto industry will build.

His goal is not profitability or making cars that people want to drive, it's making the type of cars that he thinks the rest of us should drive.

Welcome to the nanny state.

Update: More here.


vince said...

why should't there be conditions? there are conditions of federal grants, contracts, etc.

if GM doesnt' wanna jump thru the hoops, let 'em fail or innovate w/o the gov's help. they have a choice

vince said...

why should't there be conditions? there are conditions of federal grants, contracts, etc.

if GM doesnt' wanna jump thru the hoops, let 'em fail or innovate w/o the gov's help. they have a choice

Colin said...

Oh sure, they are well within their rights to impose conditions. The companies accepted the money and now the government calls the tune.

It doesn't make it any less absurd that the government is going to dictate what types of cars can be produced, or that the government -- which can't get a grip on its own finances -- is going to place these companies on the road to recovery.