TBO.com - TBO is Tampa Bay Online

White House Steers GM Toward A Shaky Bridge

ADVERTISEMENT

The Tampa Tribune

Published: April 1, 2009

The rationale last year for loaning public money to General Motors and Chrysler was that if they crashed, the entire economy would be damaged.

We and many others cautioned that being right about the damage didn't mean that the bailout would prevent it.

"The situation will be no different in the spring," we wrote last winter. Now it's spring and President Barack Obama has found himself in the driver's seat of companies that have veered far off the road of prosperity and need more federal help.

A few days ago Obama effectively fired GM boss Rick Wagoner for not turning the company around and told Chrysler it better move fast in selling a piece of itself to Fiat, an Italian company.

Whether the Emergency Economic Stabilization Act of 2008 gives Obama such powers is academic. If the automakers are going to take billions in tax dollars, they must also agree to take orders from politicians.

And politicians always have answers, even if they don't have manufacturing experience. Obama's plan is to force a transition to a different future than the corporate executives imagined. Whether they can make the switch to more efficient production of more popular cars is uncertain.

There's a long bridge ahead.

"General Motors can survive, but it has to make difficult decisions that it hasn't made," Frank Morsani tells us. Morsani, owner of several local automobile dealerships, says that manufacturers must readjust to a domestic market that will be buying fewer cars.

Last year, Americans bought 13.3 million new cars, less than the 16 to 17 million automakers have come to expect to sell.

So far this year the annual pace is down to a dismal 9 million vehicles, Morsani said, but notes that fleet buying by big companies has nearly stopped, and that it is sure to pick up later this year.

"Every year we're scrapping 12.4 million cars," Morsani said. At some point, they have to be replaced.

They will be, but it's uncertain who will get the orders. Obama promises an exciting new beginning for U.S. automakers, but he can't make that promise come true.

Now he is supporting a $5,000 tax credit for drivers of gas guzzlers who trade for a more efficient car.

That means taxpayers who have already made the switch could be subsidizing those still taking their kids to soccer in a Hummer. It may be good for GM, but it's politically risky for Obama.

The White House is also guaranteeing automobile warranties and will no doubt come up with other incentives to move its products.

Aside from direct costs for taxpayers, government control of big car companies brings the threat of trade retaliation against its foreign-based competition. That would be terrible for consumers and could spark a trade war.

Back in 1952, a former head of GM told Congress that what is good for the country is good for General Motors and vice versa.

Now that Obama is in charge of the man in charge of GM, he should reassure the nation that what's good for GM won't be too painful for us taxpayers.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT