President Obama insists that the government is a “reluctant shareholder” in General Motors, and that he has no interest in running the former icon of American industry. Still, taxpayers have reason to feel queasy about their new role as majority shareholders in the automaker.
If bankruptcy proceedings go as hoped, GM will emerge late this summer as a smaller company with a more manageable cost structure — and a board of directors chosen mostly by the U.S. government, which will have a 60 percent ownership stake to show for its (gulp) $50 billion investment.
Obama says he has no interest in running an auto company, and that he’ll leave day-to-day business decisions to the company’s new leaders. (Never mind that in March, he fired GM CEO Rick Wagoner.) That’s a pledge he must keep, no matter how much various interest groups try to turn up the political heat on trade rules, job outsourcing, vehicle design, fuel efficiency, etc. Keeping a reasonable line between government and free enterprise will provide the ultimate evidence that the administration’s true aim is to return the U.S. auto industry to viability, saving potentially hundreds of thousands of jobs now and for future generations.
Government action was necessary. Sitting by as GM and Chrysler sank deeper into debt likely would have led to their liquidation, and Ford Motor Co. may have gone down, too, along with suppliers and dealers. Against the backdrop of the worst economic downturn since the Great Depression, such a shock wave had to be prevented. It was for similar reasons that the Bush administration launched the massive bailouts of AIG, Fannie Mae, Freddie Mac, the banking system and, yes, GM.
Still, this degree of government intervention in the marketplace gives most Americans pause, as it should. For if political considerations become the major force guiding GM’s business strategies, the business results won’t be good, and the taxpayers will have invested in a loser.
Obama appears to have delivered the swift kick GM and its stakeholders needed to address problems that had been building for years. Reorganization, along with the government’s $50 billion infusion, will allow for a fresh start.
Once a new board is in place, the Obama administration must tread very carefully — protecting the taxpayers’ interests as majority owners without getting in the way of day-to-day business decisions. How well it does that will go a long way toward determining GM’s ultimate success.
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