Salesman in chief
Hearing President Barack Obama talk about the U.S. auto industry Monday was a little like listening to a car salesman talk about a vehicle that’s “just right for you.”
You know there are some gems of truth in what the salesman is saying, but you’re also aware that some car salesmen have a tendency for exaggeration.
The gems in Obama’s pronouncement include:
• The restructuring plans offered by General Motors and Chrysler a month ago as part of their request for more federal bailout money were inadequate. As we said back then, they were very short on specifics about how they would turn their financial situations around.
• GM CEO Rick Wagoner and GM’s board of directors needed to go. During Wagoner’s tenure, GM’s share of the U.S. auto market fell from 28 percent to 22 percent and its stock price had plunged 75 percent even before the current market crash began.
• Chrysler won’t make it as a stand-alone company. It needs to partner with someone like Fiat as soon as possible to survive.
• Most importantly, bankruptcy is probably the only viable option for these companies to rework unsustainable labor contracts and restructuring much of their debt.
However, there are parts of what Obama said Monday that should give everyone pause.
• “The United States will lead the world in building the next generation of clean cars,” Obama said. But the “viability summary” released by the president’s Treasury Department said GM and Chrysler are more vulnerable to clean-fuel standards than other companies.
• The president left open the possibility of a substantial new influx of taxpayer dollars to help the struggling auto firms, if they play by his rules. At what point will he conclude they have received enough?
• He gave little indication of how his plan might affect other car companies. Ford and foreign companies that make vehicles here have not asked for government assistance. How will they compete with government-subsidized companies?
Obama is to be credited for some tough talk and realistic appraisals about the state of GM and Chrysler. But it’s far from certain that government micromanagement of either of those companies will make them any more profitable than they have been of late.