President Obama delivered solid remarks on the auto industry this morning, informing us that neither GM’s nor Chrysler’s government-mandated restructuring plan “goes far enough to warrant the substantial new [taxpayer] investments that these companies are requesting” and laying the groundwork for a gut-wrenching period of concessions ahead.
I thought he was particularly effective on a couple of key points: (1) Openly discussing a potential bankruptcy proceeding for GM or Chrysler and explaining that the process doesn’t necessarily mean the end of the line for the companies; (2) emphasizing that GM and Chrysler are – and must be – private companies.
On the latter point, the president said, “[W]e cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies – and this industry – must ultimately stand on their own, not as wards of the state.”
Furthermore, following the announcement that the government had forced the resignation of GM’s CEO and is working with GM and Chrysler to produce long-term operations plans, the president said, “Let me be clear: the United States government has no interest or intention of running GM.”
Perhaps a good analogy is to think of the government as a super-creditor, with a giant cudgel ready to be employed if the companies don’t accede to its demands.
At times President Obama did sound like an auto executive, touting GM’s recent press awards and guaranteeing service warrantees on both GM and Chrysler vehicles. Fortunately he didn’t ask us what he needed to do to get us into a new Buick today.
The only false notes came at the beginning of his remarks, when he said, “The pain being felt in places that rely on our auto industry is not the fault of our workers, who labor tirelessly and desperately want to see their companies succeed.”
That’s simply not true. Much of the pain is caused by the UAW’s decades-long effort to garner ever-higher wages and lifetime benefits in return for less and less work. The president’s statement was a sop to unions. Hopefully it won’t come back to bite GM as they try to negotiate labor concessions.
In absolving workers of any responsibility for the auto mess, the president also said, “[I]t is a failure of leadership – from Washington to Detroit – that led our auto companies to this point.”
Certainly Detroit management has screwed things up. But Washington? It’s not clear how Washington failed and the president never explained what he meant. Blaming “Washington” is simply a reflex action for President Obama at this point.
But overall the remarks offered a realistic view of the situation facing GM (gloomy) and Chrysler (ominous). It’s clear the government wants these companies to be structured very differently before it commits any more public money. Workers will get pinched and bondholders will get hosed, but taxpayers may have a glimmer of hope.
