Obama’s support for Detroit was a rattling clunker
Obama’s support for Detroit was a rattling clunker
Autoworkers gave President Barack Obama strong support when he was running for president in November; he didn’t do much to return the favor Monday.
The level of support Obama expressed for the U.S. auto industry was underwhelming.
After pressuring General Motors CEO Rick Wagoner to resign — which Wagoner did — Obama gave the company 60 days to get its house in order. One would think that if anyone should understand that it takes a new executive more than 60 days to clean up a problem that has been years in the making, it would be Obama.
Obama’s auto task force is overseeing the replacement of most of GM’s board of directors. If you were setting someone up to fail, you couldn’t do much more than dismantle the leadership and then impose an unreasonably short deadline.
Some experts
And speaking of the president’s task force, this is a group that has a lot of financiers and policy wonks but no one with experience in the automobile business. Indeed, it has few members who have a consumer’s understanding of Detroit’s automobiles. It has as many members who don’t even own a car as those who own Detroit iron — that’s two of each. And four are Cabinet members, which means they don’t even drive — they have government cars and drivers (though presumably those cars are American made).
We wonder how many nonbankers the president has recruited to oversee the nation’s financial bailout plan, or how many of them don’t have bank accounts or stock portfolios.
Obama said he is committed to preserving an American auto industry, but his tone sent a message that he doesn’t think bankruptcy would be that big a deal. He’s already laying part of the groundwork for bankruptcy by announcing that the federal government will put its full faith and credit behind GM and Chrysler warranties. There’s no evidence that anyone asked for that extraordinary declaration.
We still believe bankruptcy for either General Motors or Chrysler should be the absolute last resort. It is puzzling and a little scary to hear Obama join Detroit’s biggest critics — a cabal of self-serving Southern senators from states with foreign transplant auto manufacturers — in acting as if the $17 billion that has been loaned to GM and Chrysler is going to break the bank. Bailouts for the nation’s financial institutions are being calculated in the hundreds of billions and trillions of dollars. AIG alone has gotten more than 10 times what has been invested in GM and Chrysler. There’s no question that $17 billion is a lot of money, but the potential ripple effect of a GM bankruptcy is larger — a lot larger.
We realize that the rest of the country may not be as invested in General Motors avoiding bankruptcy as Detroit and the Mahoning Valley are. They don’t have thousands of residents whose very future depends on the pensions they were promised and the health coverage they receive. The Valley’s economy — and the standard of living of GM and non-GM families alike — are dependent on the success of General Motors.
Bankruptcy has repercussions
The “let them go bankrupt” sentiment runs about four to one in the nation at large and there are even pockets of it here.
But the rest of the nation has reason for concern as well — whether they realize it or not. Any working man or woman should worry about what the effect of a GM bankruptcy on the Pension Benefit Guarantee Corp. or the strain that would be placed on the health-care system anywhere that GM retirees now live.
And there are hundreds of suppliers and tens of thousands of their employees who depend on GM. Likewise those suppliers and thousands of auto dealers have contracts with General Motors that would be abrogated in a bankruptcy. GM’s bondholders and shareholders would take a bath while their tax dollars would continue to be used to bail out financial institutions.
Just two days ago, Treasury Secretary Timothy Geithner said: “Some banks are going to need some large amounts of assistance” and he warned that the terms of a $500 billion public-private program to aid banks “cannot change” for investors or they’ll lose confidence in the plan.
We’d feel a lot better if President Obama voiced a tenth of that concern a day later for the Detroit-based carmakers.