Obama, Car Dealer In-Chief
Ronald Reagan must be spinning in his grave. In 1984, the champion of the free market knocked out his big government “dirigiste” challenger Walter Mondale by 49 states to one. A quarter of a century on, the current occupant of the White House is all but running the US car industry.
President Obama has rejected the survival plans submitted by General Motors management, gave it 60 days to work out new ones, sacked Rick Wagoner as GM boss, gave Chrysler 30 days to merge with Italian suitor Fiat and is even set to decide what brands live or die. In effect, he’s saying that what’s good for America will have to be good enough for General Motors. His power to do this comes not from statute, but from taxpayers’ cash – GM’s last hope of staying afloat – and Obama made clear he will force GM into a quick managed bankruptcy if it looks like the fastest way to remake the company.
Chapter 11 Bankruptcy is, in fact, Obama’s preferred route. The car makers could use it to purge their biggest problems, enabling them to renegotiate terms with their creditors. (The new scheme for guaranteeing car warranties will make it easier to take this route without poleaxeing sales.) But if that’s his endgame, the big guy has badly miscalculated. We can forgive Obama his daft, dewy-eyed rhetorical guff about the auto industry as an emblem of the American spirit – that kind of silliness is expected from politicians. The problem is that he really does have too rosy a vision of Motown. He and his car quango seem to think that short sharp shock of bankruptcy filing would be a cure all. They’re wrong.
Detroit’s problems go much deeper than Obama understands. This is not about leadership, it is about huge legacy costs in pensions, healthcare, uncompetitive working practices and inflated wage rates. And it is sensationally bad politics from the new president. By getting too intimately, involved, Obama and the Democrats are now completely implicated in the coming GM wreck - and have made it likely that March’s “menacing threat” will soften into June’s “wobbly wiggle-out”.
With or without a formal bankruptcy, expect backdoor subsidies forever and the world’s most expensive jobs programme. For better or worse, Obama is now on the hook. Stand by for “Joe Biden doing car commercials within weeks”.