Or is just that Congress didn't get the message?
On June 1, President Barack Obama gave a speech on the restructuring of General Motors, in which he claimed that:
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 and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They -- and not the government -- will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.
That promise is already looking pretty weak. Case in point # 1:
Rep Barney Frank (D-Mass.) won a stay of execution on Thursday for a General Motors plant in his district that the automaker had announced it would close.
Top executives of General Motors Corp. and Chrysler LLC defended plans to cut thousands of car dealerships at a congressional hearing where senators questioned whether the dealers were being unfairly treated in the companies' downsizings.
The hearing Wednesday was the latest signal that Congress wants to gain more influence over the Obama administration's car-industry rescue.
Democratic congressmen are protesting GM's plans to import Chinese-made cars. On the right, Sen. Kay Bailey Hutchison (R-Texas) is trying to delay the termination process of dealerships run by government-backed auto companies. Government policy could interfere with business decisions in areas such as foreign trade, emissions standards, or the adoption of certain manufacturing technologies. ...
Maybe Obama meant what he said and he just hasn't managed to get Congress to toe the line. But his track record's not promising:
"We're already seeing them force out the CEO, restructure the board and talking about the right kind of cars for them to build," said Douglas Holtz-Eakin, who was a top policy aide to former Republican presidential candidate Senator John McCain.
He was referring to the decision to pressure Rick Wagoner to step down as GM's chairman and chief executive. ...
Louis Lataif, a former Ford Motor Co executive who is now dean of the school of management at Boston University, doubted government officials can resist the urge to meddle. The government also is likely to still be GM's major stakeholder in 2011 when the next round of contract talks with the United Auto Workers union -- which campaigned for Obama ahead of last year's election -- are due to take place.
"The question is will politicians be able to keep their hands out of the cookie jar, and I don't think so," said Kevin Hassett, a senior fellow at the conservative American Enterprise Institute.
The Obama administration may have already hindered GM's ability to re-emerge as a viable company in a timely manner by granting favorable terms to the United Auto Workers, Hassett said. Under a normal bankruptcy route, the union would have been forced to make more concessions in terms of wages and benefits, he said.
The credibility of Obama's promise is also called into question by the way his administration threw the rule of law under the bus by gutting the rights of the secured creditors of both GM and Chrysler.
In sum, if Obama wants to keep his promise, he's going to have do more than give pretty speeches. He's going to have to resist political pressures from key allies (the UAW) and politically powerful constituencies (e.g., the dealers) and keep Congress in line.
Personally, I'll believe it when I see it. Because Obama doesn't seem very interested in holding Congress' feet to the fire and nobody seems able to hold Obama's feet to the fire.
Update: From Thom Lambert:
In his recent speech on the GM bankruptcy, President Obama reassured Americans that the government, which now holds 60% of GM’s stock, is not going to try to take over management of the company ....
It wasn’t true when he said it. President Obama had already intervened on the issue of where GM should be headquartered. The night before his speech, the President telephoned Detroit mayor Dave Bing to provide assurance that he opposed moving the company’s headquarters from Detroit’s Renaissance Center to the suburb of Warren. The President’s opposition pretty much put the kibosh on any business decision by GM to relocate its headquarters to take advantage of incredibly lucrative tax incentives.
Perhaps it’s not fair, though, to call the President’s statement false. The statement was primarily forward-looking, so it’s not really inconsistent with past meddling. ...
Is anybody surprised that Congress insists in having some say over GM’s business decisions? Will anybody be surprised when the Obama administration itself exerts control over a run-of-the-mill business decision that adversely affects one of the President’s favored groups (e.g., organized labor)? Does anybody really expect success from a company with so many popularity-seeking chiefs who are beholden to so many constituents and who have no real need to earn a profit on their “investment” of other people’s money?
Not me.
throwing the rule of law under the bus? If GM and Chrysler were to have gone straight to bankruptcy, the secured creditors would have literally got pennies on the dollar.
As for Congress, last I checked, they were a co-equal branch. And I'm guessing all this grandstanding by members of Congress would have happened anyway.
Posted by: KG | 06/04/2009 at 09:47 PM