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June 01, 2009


It's an interesting idea, but not only isn't it likely to be adopted, it also probably wouldn't work very well. After all, the Administration and/or the Democrats controlling Congress would appoint the "independent experts," who would no doubt be selected in part because they share the Administration's view as to what is the proper product mix for GM (i.e., green) and which stakeholder is daddy's favorite (the UAW).

In addition, even if control of GM were vested in an independent board, it is to the Administration and Congressional Democrats that GM would have to appeal for additional infusions of cash down the road and/or for laws and regulations that favor its product mix (e.g., fleet average standards and subsidies to buyers). The Administration has paid the piper and will get to call the tune.

President Obama can say he inherited this problem, but he loudly encouraged the Bush Administration to loan the original $20 billion to GM, and he has presided over the decision to give GM an additional $30 billion, all the while pushing GM to disfavor the bondholders and favor the UAW in the reorganization. (To be fair, although the UAW didn't agree to cut its base pay or ease its work rules, it did agree to eliminate dental and vision benefits from its health care plan.)

Obama's actions have not always been consistent with his stated goal of taking a hands-off approach. E.g., Obama chose to make or or influence the following decisions:

-- to fire the CEO,
-- to choose the new CEO
-- to appoint an auto czar with various powers over auto companies
-- to involve the auto czar in deciding which GM dealerships to close.
-- to affect the decision of which models to build

By comparison, George Bush (wrongly IMHO) made a loan to GM, but he made no effort to direct or manage the company.

Yes, there is a threat to meddling.

But the communities where GM has employees are also "stake holders" - the same as share holders, bond holders, union employees, dealerships, suppliers, etc.

Offering support to Mayor Bing seems similar to offering support to a city that has experienced a severe storm. The mayor wants to protect his community and there seems to be no harm in offering general reassurances of this type. Is there actually some compelling reason to cause more disruption...?

I wouldn't worry too much about GM being mismanaged any more poorly than they have mismanaged themselves.

Even the argument that the less government interference the better isn't completely supportable. The Japanese automakers have thrived for sixty tears with extensive government involvement. What matters more is making intelligent (or coordinated) decisions and their implementation.

If we look below the surface there are almost no markets or established industries that exist free of government oversight. It seems premature to wring our hands over potential interference as an abstract evil. But I would certainly agree that establishing GM outside of government "stewardship" should be accomplished as quickly as is reasonably possible.

I voted for Obama, I admire him tremendously, and I know he inherited an economic disaster. Unfortunately, I believe that Obama is making a mistake in acting as if there is any chance that GM will ever be viable. There are some things that even Presidents can't do. Bush really thought he had enough money and power to fix Iraq. Obama really thinks he has enough money and power to fix GM. Unfortunately, it's hard to imagine GM making cars that real people would actually buy voluntarily. People buy cars based on money, but also on safety, reliability, and many other things. And the cars made by (for example) Toyota and Honda are simply too good. GM will never catch up. What is Obama going to do, put restrictions on sales of Toyotas? Will there be a presidential decree ("temporary", of course) that Toyota can't sell more Priuses than GM sells Chevy Volts? We're talking about parents who don't want their precious teenagers driving around in a Chevy Volt. You can't simply force cars on millions of American households. I regret this, because I know Obama has good intentions, and he's obviously working very hard. But it'll be like Bush and Iraq: the deeper Obama digs with GM, all he'll do is go deeper and deeper.

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