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President Obama Takes The Wheel

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By DAVID E. SANGER

The New York Times

Published: March 31, 2009

The message President Barack Obama delivered to Detroit on Monday was as remarkable as it was blunt: What is good for America will have to be good enough for GM.

As an assertion of government control over a huge swath of the industrial landscape, Obama's decision to reshape the industry has few precedents.

The U.S. government briefly has taken over railroads and steelmakers, and over the past nine months it has taken control of the AIG insurance group and Fannie Mae and Freddie Mac, firing their management as well.

But running a vast manufacturing company, one that still looms over the American Midwest, is an entirely different kind of enterprise.

In essentially taking command of General Motors and telling Chrysler to merge with a foreign competitor or cease to exist, Obama was saying that economic conditions are sufficiently dire to justify a new level of government involvement in the management of corporate America.

At a time when economists are debating the merits of nationalizing sick banks and pouring taxpayer money into the economy, it raises the question of whether deteriorating circumstances are leading the administration down a path to deeper intervention in the private sector.

In his announcement about the automobile plan, Obama suggested just how tricky it can be for Washington to wade into the marketplace: He declared that the government will back up warranties on Pontiacs and Buicks and the rest of the GM and Chrysler products so consumers will have no fear of buying cars.

It may have been a necessary step, but it means that the government now not only is the ultimate guarantor of savings accounts and insurance policies, but also it will cover that blown transmission.

When he stood in the White House to unveil his approach, Obama took pains to assure the country that "the United States government has no interest in running GM."

No interest, perhaps, but also no choice.

After a team of his aides concluded that the latest viability plan once again is far too modest, far too optimistic and far too late - a product of the same thinking that allowed Japan in the latter 20th century to carve away one of the great American manufacturing franchises - Obama took a step that would have been unimaginable 12 months ago.

He forced out the chairman of a company that in a previous era regularly would send its executives to Washington to run the gears of government. He made it clear that the White House would oversee, and heavily influence, decisions about what plants to shutter, what brands of cars to abandon and how much workers and managers will be paid.

And with no edge to his voice, he left hanging the threat that he might force GM into a quick, managed bankruptcy to remake the firm.

That message was directed at GM's reluctant bondholders, an unsubtle warning they must negotiate to get 16 or 20 cents on the dollar or risk getting nothing.

Obama did not nationalize the company, at least in any technical sense. In that respect, his action on Monday differed significantly from Harry Truman's decision in 1952 to take over the nation's steelmakers rather than allow a United Steelworkers strike to halt steel production.

That action quickly was overturned by the Supreme Court, which ruled Truman did not have the authority.

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