Has The President Overreached With GM & Chrysler?

I stopped what I was doing yesterday to follow the president’s news conference regarding the auto industry, particularly as related to General Motors and Chrysler, the two companies who have been at the center of the woes surrounding domestic production. I figured I needed to hear straight from Barack Obama what he had to say about the two automakers particularly since their fates are tied to whatever the federal government dictates to them.

GM CEO Rick Wagoner Resigns

Although the president announced that GM President/CEO Rick Wagoner had resigned on Monday morning, I knew over the weekend that he was already out. Indeed, one of Obama’s representatives asked for and received his resignation on Friday and by Sunday I saw that Automotive News had already shared that information with its readers.

Quite a few people have expressed dismay that the federal government has intervened in such a way with a public company, particularly by ousting the boss. Under normal circumstances I would have been appalled, but these conditions are far from normal.

Last fall, when the chairmen of Chrysler, Ford and General Motors appeared before Congress asking for federal support, I saw what was on the horizon: any funds received by the automakers would come with strings attached. After all, the money they would be getting would be from taxpayers, which is you and me.

Ford Management Must Be Grateful

Just as 2008 was drawing to a close and with the Bush administration three weeks away from ceding the White House to Barack Obama, loans for GM and Chrysler were approved while Ford’s request for a line of credit was denied. That denial was the best thing to happen to the Blue Oval as Ford has managed to stand to the side as all of the attention (mostly negative) has been focused on GM and Chrysler.

I have to think that there are a group of executives in Dearborn who are immensely grateful that George W. Bush ignored Ford’s request as that move has allowed the company to move forward without government oversight. Ford’s condition isn’t as dire at its domestic competitors, although if the market stays down for several more months, that could all change. Meanwhile, Ford is basking in the limelight as being the only solvent major U.S. automaker.

GM, Chrysler Buy Some Time

February 17th was the deadline for GM and Chrysler to get their restructuring plans to DC who promised to make a decision by March 31st regarding their respective fates. At yesterday’s news conference we learned that both companies have gained a little extra time, but with additional strings (more like ropes) attached.

Chrysler is expected to pursue its alliance with Fiat and must come to terms within thirty days to accomplish that feat. In the interim, Chrysler will receive some funding to stay alive and if the other parameters are met, then additional funding will come forth.

General Motors is expected to continue to negotiate with the United Auto Workers (UAW) to gain additional concessions while pressuring bondholders to do the same. The president remarked that GM (and Chrysler) had fallen short in their restructuring efforts and would be given sixty days to complete the process. Likely, several brands will be shuttered including Saturn and Hummer, possibly Saab and Pontiac too.

Restructure or Face Bankruptcy

Should either company fail to restructure, they’ll be forced into bankruptcy by the federal government. The president indicated that neither company would languish in that state for years, instead they’ll most likely be required to make rapid changes in a bid to quickly emerge leaner and smaller than before.

The United Auto Workers probably had a lot of say in how Obama proceeded on Monday, given the president’s strong union support in Election 2008. The United Auto Workers has made quite a few concessions of late, including the closure of the widely-panned JOBS program which gave workers full pay and benefits in lieu of layoffs. However, wage levels for union workers are still above what Toyota, Nissan and Honda pay their domestic workforce, a disadvantage the Big Three have pointed to for many years.

Guaranteeing Car Warranties

Besides UAW and GM bondholder concessions, the federal government has agreed to back new car warranties for GM and Chrysler, but not Ford.  What this means is that if either Chrysler or GM does go through bankruptcy, then the federal government will pay for repairs on these vehicles. That move is meant to instill confidence in the two companies, encouraging hesitant consumers to make a purchase.

I believe we’ve only seen a portion of what is coming forth for GM and Chrysler, with the next 30-60 day period telling us much. A case could be made that the federal government shares some of the blame for the auto industry’s woes especially given the safety, fuel economy and pollution mandates that have saddled each company for decades.

Restructure Chrysler and GM or Die

But, restructuring could be the best thing for both companies as without it, neither could possibly survive. I am not thrilled that GM could end up becoming Government Motors when all is said and done, given the tens of billions of taxpayer dollars pouring into the company. How far the Obama administration goes in dictating what products GM will build is not known right now, but I would hate to see that responsibility shift from the automaker to DC.

I have never been confident that Chrysler could continue to survive an an independent entity even when Cerberus Capital Management L.P. acquired an 80.1% share in the automaker in 2007 (Daimler AG holds the remaining 19.9%).  Thus, its alliance with Fiat is its only hope of survival, giving the company the opportunity to bolster its fleet with small cars while ceding 35% of it to the Italian automaker.

When all is said and done, the automotive landscape will likely be radically changed. If Ford can hang on, there is a good chance they’ll pass GM as the largest domestic producer of automobiles, with Toyota right behind them. The UAW will lose some of its bite, bondholders will see their investments shrink and as far as us beleaguered taxpayers go, we may or may not see a return on our investments.

Related Reading: Reluctantly, GM Chief Steps Down

Obama Stumbles Out Of The Gate

I’ve been keeping my senses tuned to what is going on here in the US of A, particularly as it pertains to our 44th president, Barack Obama. With great fanfare he was inaugurated, ushered into the White House, and basked in all the adulation sent his way.

In some ways his election was a statement maker, proving to America as well as to the world that just about anyone can become president. In countries where deep racial division has been going on for centuries, America offers hope that they, too, can overcome.

Neither Presidential Candidate Was Particularly Strong

But, we’ve also witnessed one of the worst presidential races in the history of our country. The Republican candidate, John McCain, was clearly not a conservative, rather an admired war hero who managed to win his party’s nomination through determination and tenacity belying his age.

The Democratic candidate was, of course, Barack Obama who stole victory out of the jaws of defeat by knocking off the champion — the unbeatable Hillary Clinton — while gaining plenty of help from mainstream media types who hyped his candidacy while refusing to properly vet him.

Never mind that the public was enamored with his smooth, silky baritone voice, a major oratorical improvement over the standing president, George W. Bush. Add in years of racial guilt, an ultra liberal agenda and disgust with “D.C. politics as usual” and Obama’s ascendancy was all but assured.

Is Obama In Over His Head?

As I observe what has transpired since inauguration day, I have gradually come to the conclusion that President Obama is in over his head. I’m not saying that he isn’t fit to be president (okay, he is a novice), but his worldview is getting in the way with him getting things done.

When he campaigned, Obama promised Americans that it would not be business as usual when it came to politics. That promise gradually lost its glow as one after another Clinton appointee was chosen by The One. And, some of those appointments have been real doozies.

Fab Five? I Don’t Think So!

There have been quite a number of people appointed by the president to various cabinet, staff and ancillary positions. Out of all of these people considered, I found five who seem to be poor fits particularly based on Obama’s promise to change things in Washington, DC:

Bill Richardson, the governor of New Mexico, was appointed as Commerce Secretary in early December, a post he had to back down from one month later due to a personal revelation about some improper business dealings in his home state.

Timothy Geithner, who was recently confirmed by the Senate (what were they thinking?!) as head of the U.S. Treasury, failed to pay medicaid and income taxes for many years. Outrageously, he is now in charge of the very same taxing authority, the I.R.S., whose duty is to enforce our federal taxation system.

Eric Holder was recently confirmed as the Attorney General and has a history that is, well, a bit far to the left. He was grilled (not too thoroughly) by the Senate over his last minute Clinton administration pardons of a tax cheat, Marc Rich, and 16 Puerto Rican terrorists. Never mind his views on the Patriot Act, Gitmo and the so-called “torture” of people who would do us much harm if given the chance.

Nancy Killefer was a nominee for the all-new position of Chief Performance Officer, a job where the incumbent is tasked with overseeing federal budget and government reform. Unfortunately for her, Killefer’s own finances needed a lot of reform when “unspecified tax issues” scuttled her bid.

Tom Daschle, who was targeted and tossed by Republicans in his 2004 U.S. Senate seat for obstructing Bush policies, was appointed as Secretary for the Department of Health and Human Services, but had to back down when revelation of his own tax problems began to surface. Obama admitted that the Daschle appointment was a mistake, taking full responsibility for his choice.

I’ve only listed five of the controversial Obama appointments, two of whom are now serving in their confirmed positions. There are other people in the president’s administration who give credence to the statement, “…when it comes to Washington politics, it is busy as usual for President Obama.”

Should We Be Surprised?

Not one of these choices (and subsequent appointments or retractions) should come as a surprise to anyone as just like the president himself, many were not properly vetted.

Add in the ongoing financial crisis besetting our country and the pork-filled “stimulus” bill about to be approved by Congress and signed into law by the president (against growing discomfort from Americans of all political stripes) and what we’re witnessing is a president who just doesn’t seem to be moving with confidence through his first few weeks in office.

Your thoughts?

Related Reading

Obama: “Government Is Our Only Hope” (Political Conservatives)

Obama’s Superbowl Performance (The Black Sphere)

The Impending Obama Meltdown (National Review Online)

The Stimulus Package That Isn’t (MyTake)