What's Good for America Had Better Be Good Enough for GM
Much of the business world is frowning down their columns today after the Obama administration attached a major condition to the bailout of sputtering GM corp: The resignation of Rick Waggoner. The Obamadmin also hinted that it would allow GM and Chrysler to sink rather than be dictated the terms of a bailout.
Waggoner has been in charge for about half a decade, give or take, and all that time there was no plan for a future, no attempt to think beyond the next model year, and a total lack of vision. All the Obama administration did was precisely what any consultancy would have done.
“It [restructuring] should have happened years ago,” said Mary Ann Keller, a longtime auto analyst who has been unrelentingly critical of G.M. for, in her words, “being perpetually two years behind the curve.”~NYT
“It must have come as shock to their management, because when you think about it, the government never said no to them before,” Ms. Keller said. “When G.M. complained about the Japanese, the government got ‘voluntary restraints’ on car imports. When G.M. said it would be hurt by fuel efficiency standards, the standards were usually watered down.”
In other words, the "free market" was adjusted and tinkered with to allow non-viable companies to cling to life. And the new administration clearly feels there's been enough of that.
New thinking is necessary, has been for years. The Big Three have been manufacturing oil lamps as the world began to shift to electric light bulbs. All the US government is saying is that new thinking must be a condition of any bailout. And that's good.
Of course, since half the consultancies around are likely to depend on bailout money and the subsequent necessary restructurings to fill their coffers lo these next three years of recession, one is unlikely to hear this sentiment aloud.
As regards the bailouts in various nations in response to the flagging economies thereof, I have one major thought. It is ironic how the same businesses that are so ready to cry "state interference" at the first sign of regulation are the same ones who now cry "bail us out with public money."
My answer would tend to be "No." No bailout. You sell part of your company to the country you're asking for the bailout.
In the nineteen-thirties, banks that FDR's administration bailed out were de facto nationalized, with the United States government taking a slice of each in return for bailout money. The idea wasn't to get a controlling interest. It was to ensure that when the market picked up, the companies had to repay their loans. It was a market-based mechanism, and it worked.
Obama has thus far avoided any mention of nationalizing anything, which is a shame. Yet he has been outright accused of nationalizing AIG for suggesting that the buffoons responsible for sinking her return their multimillion-dollar bonuses, and excoriated for forcing Waggoner off the waggon.
When he stood in the White House to unveil his approach, Mr. Obama took pains to assure the country — twice — that “the United States government has no interest in running G.M.”~The NYT again (Which also describes the bailout as "nationalizing")
No interest, perhaps, but also no choice.
On the bonuses: The vast public attention the AIG bonuses have received is like passengers on the Titanic complaining that the visible part of the iceberg was spoiling the view. Yes, such public displays of staggering greed and hypocrisy are unprecedented. And on Waggoner, it's as though the major business papers had suggested that Joseph Hazelwood be allowed to run tankers for Exxon again, given his successful history thus far. The ship has gone down, and the captain has a duty to go with her.
But the bonuses and Waggoner are a tiny portion of a much larger, rather more complex, picture: An investment for which the American taxpayer is receiving nothing in return.
If you're asking that your private firm be bailed out by the public--especially if you're doing so while slashing jobs and benefits, causing even greater strain on the public purse, then you are asking the government to nationalize you. And it should.
But Obama has specifically nixed the idea of the US government taking a turn in the driver's seat, content instead apparently to invest US taxpayer funds in bad debt and leave it at that.
I still like Obama, and if he decided to take every nickel of taxpayers' money to Vegas and bet it all on "00" he still wouldn't be as incompetent, plutocratic, greedy, venial, petty, and stupid as any collection of Bush administration wonks you care to name. But to give money without asking anything in return?
It's as far from "nationalizing" anything as could be imagined.
Ironically, the Unions are likely to lose a lot of power in this as well. New workers will probably find themselves coming in at the same salaries as their compatriots working for Mecedes and Toyota in the southern states, and their health plans are likely to be pared back.
However, if the new administration also manages to push through some health care reform, it's likely to reduce the burden on both companies and workers, which should help mitigate the effects.