Obama makes his move on Detroit
The Obama administration has pressured longtime General Motors CEO Rick Wagoner to resign, and he has done so. That high-profile decision — the first of several as the government tries to force Detroit to restructure itself — will no doubt generate complaints that the federal government is overreaching.
Let’s review the situation:
First, the federal government is not requiring GM to fire its CEO. It has no such power or authority. Instead, the federal government is pressuring GM to fire its CEO AS A CONDITION FOR GETTING TENS OF BILLIONS OF FEDERAL BAILOUT DOLLARS.
That’s a very important difference.
In private enterprise, a distressed company facing bankruptcy will often beg outside investors to rescue it with an injection of cash. However, the company understands that the bailout will come with conditions. The outside investors or lendors will almost certainly demand changes in company operation and management. They may want control of the board. They may insist on a new CEO. That’s just how such things work. The assumption is that if the company was well-run in the first place, it wouldn’t be needing outside investment.
The federal government is doing the exact same thing. GM and Chrysler came to the government seeking huge sums of taxpayer money to keep operating. Barack Obama responded just as private investors would. He had outside experts comb through the automakers’ books and operations, and then he demanded changes as a condition of saving those businesses. To do anything less — to simply hand the money to Detroit without forcing changes in management, operation and labor contracts — would be grossly irresponsible.
Conservatives always complain that government ought to act like a business. In this case, it has.
It is fine to argue that the government should not bailout Detroit or Wall Street, that we should let those companies and institutions fail and deal with the consequences. I think that’s an overly purist and largely impractical approach in the face of this historic crisis, but I do acknowledge that it’s a logically consistent approach and I understand its appeal.
However, if you believe the bailout is necessary, you also have to accept the necessity that there will be strings attached to that money.
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123 comments Add your comment
I Report/ You Whine
March 30th, 2009
11:53 am
Spoken like a true socialist, Bookman-
Instead, the federal government is pressuring GM to fire its CEO AS A CONDITION FOR GETTING TENS OF BILLIONS OF FEDERAL BAILOUT DOLLARS.
Geez, you don’t have to get so excited.
Besides which, the TARP funds, which OneTerm is digging into, IS SUPPOSED TO BE A LOAN, DAMMIT!!
Hahaha, “here, before you kill yourself, sign on the dotted line, duh.”
I Report/ You Whine
March 30th, 2009
11:58 am
Federally sanctioned show trials, why not, when you know the intelligence of democrat voters, bloodlusting psychotics all-
Jeremy Anwyl, chief executive of the automotive Web site Edmunds.com, called the move “political theater” to appease an increasingly bailout-weary public.
“American taxpayers are not happy,” Anwyl said. “But this way you’re able to point to Rick and say he’s gone, and that creates an environment where the loans become politically palatable.”
ew
I Report/ You Whine
March 30th, 2009
12:01 pm
Interviewed Monday on NBC’s “Today” show, the governor of Michigan (democrat Jennifer Granholm) said Wagoner is a “sacrificial lamb.”
ew
@@
March 30th, 2009
12:02 pm
jay:
GM has been nothing more than an “insurance” provider that just happens to manufacture vehicles for quite some time. Why wasn’t the “CEO” of the union fired as well?
Let’s see how Obama’s “expertise” has impacted “the engine” that fuels the American vehicle, shall we?
Dow Jones down 282.83 points.
Should have let GM file for Chapter 11…..wouldn’t have cost the taxpayers a dime. It’s headed that way anyhoo under the clumsy “mechanical hands” of government.
Joey
March 30th, 2009
12:04 pm
I do not believe the auto-maker bailout is necessary or wise. As I recall not to long ago you posted a similar opinion.
But the big problem here is that our Federal government has failed to demonstrate its ability to operate a business that must make a profit in order to survive.
I Report/ You Whine
March 30th, 2009
12:11 pm
‘Starting today, the United States government will stand behind your warrantee’…-Oblahmi’s Teleprompter
Cool, either give me four new tires or I’ll sue your liberal as-s for discrimination, bwa.
caz1158
March 30th, 2009
12:13 pm
Jay- I don’t care how you spin it,Obama fired Wagoner!!! Now if the Govnmt is going to venture into these bailouts(which I dont agree with).Then being able to pressure or put stipulations as terms of the bailout is not uncommon,and I agree with that. But call it what it is. I think the majority of us believe that changes in the Auto industry are long overdue. Can Obama fire the Union’s next? Now that’s CHANGE I would LOVE to SEE!!!!!!!!
Dave R
March 30th, 2009
12:17 pm
So, you fire the rich CEO, but you don’t fire the head of your auto worker’s union, which is REALLY the reason why most of Detroit can’t build a car Americans can afford to buy, right?
DANGER ! Selective, creeping Socialism at work.
Way to try to justify the unjustifiable, Jay.
Brad Steal
March 30th, 2009
12:19 pm
the fact that their is no private capital at all available for detroit is in itself an indubitable indicator that detroit is dead.
too bad the gov’t gonna keep them on life support. well, at least they have good health care.
Red
March 30th, 2009
12:27 pm
It seems to me that the union CEO has done a fine job of making worker concessions during this mess. Why would he need to be fired?
Oh right, the average worker doesn’t make $250,000 or more a year and therefore, doesn’t matter since they can’t run a company.
All the American workers do is take, take, take, get sick, and then take some more. They don’t give back any value to the company and in fact, most companies would be better off if they could figure out a way to fire all the workers so the CEO’s and principles could run the business without encumbrances like safe working environments and wage laws.
Copyleft
March 30th, 2009
12:33 pm
It is funny to watch the working-class rise up in defense of the executives, isn’t it? Especially AFTER they’ve driven their companies into the ground, trashed the economy, and gone begging for bailout funds.
Working-class conservatives are the perfect example of media brainwashing at work, courtesy of talk radio and Faux News.
Swami Dave
March 30th, 2009
12:34 pm
Will these changes (largely decorative) resolve some of the systemic problems at GM & Chrysler? Most likely not.
Is it likely that government bureaucrats and wonks many of whom having no experience in the operations of a private sector organization will better manage the operations any better than the current management? Probably not.
Would it have been better for the companies to go to bankruptcy and reorganize elminating many of the constraints to profitable operations under which they currently struggle? Possibly.
However, the salient point (which I would argue is Jay’s foundation) is that one would have to be silly to feign surprise that politicians are connecting conditions with the taxpayer money that they are controlling. After years of watching Washington tie transportation money to seatbelts and secondary (see: “unfunded) mandates required for participation in specific federal programs, one would have to be a lunatic to have been surprised by this action.
This highlights the true cost of dependence which is, by definition, the surrender of control.
-Swami Dave
caz1158
March 30th, 2009
12:45 pm
Red-Get rid of the Unions would be good start. They’ve outlived there usefullness for a good while now. Overpay for underwork is the motto of today’s union’s.
Corporal
March 30th, 2009
12:49 pm
Jay:
It’s called “political extortion”. He probably learned that from Jesse Jackson.
I’m sorry, but this guy is really starting to give me the chilly willys …. and believe me, if “I” feel that way ….. real trouble is brewing …… big backlash coming ……..
G
March 30th, 2009
12:50 pm
When will the Rushpublicants in Congress who presided over the ruination of our economy summon the honor to resign?
caz1158
March 30th, 2009
12:51 pm
Copyleft-How absurd of a notion”the right being brainwashed by talk radio & fox”. I guess the left wing isn’t told how to think by majority of the media)ABC,CBS,NBC,CNBC,CNN,PBR&95% of printed press. Nice Try,but the only one’s buying that load of cr*p, is the rest of left wing SHEEP.
Corporal
March 30th, 2009
12:52 pm
caz1158:
I used to be a member (very young – age 19 – had no choice) of the Brotherhood of Railroad Trainmen. I could tell you some real horror stories …. they were out of control.
Let’s all sing together now:
“Everyone stand up and holler for the Union,
Let’s give the brotherhood a cheer.
Everyone stand up and holler for the Union,
We ain’t hit a lick all year!”
G
March 30th, 2009
12:53 pm
Wagoner’s departure is long overdue. Under his leadership, GM suffered from a shortage of vision and an abundance of arrogance. A final point- corporate culture must change. Making the CEO the Chairman of the Board is a huge mistake. It’s the equivalent of putting the fox in charge of the hen house.
G
March 30th, 2009
12:55 pm
Look for Wagoner to have his own talk show on Fox right after Suckabee.
Shawny
March 30th, 2009
12:55 pm
Overstepped his bounds, this Obama did (said in my best Yoda voice). They should have let GM file for bankruptcy last year. If the company was so poorly ran, it should have went bankrupt, like any small to midsize company would have done. I understand that there should be conditions for receiving large chunks of cash, but there should be no cash to start with and we wouldn’t be having this blog.
Obama is failing economics, from CNN page: http://www.cnn.com/2009/POLITICS/03/27/navarrette.obama.economics/index.html
Shawny
March 30th, 2009
12:57 pm
ok, some concessions from management to get the money to continue to exist. So, where are the union concessions?
Bueller?
G
March 30th, 2009
12:58 pm
Wagoner was incompetent, too old, and part of the problem. He presided over the worst of GM’s failures. He almost destroyed GM with his lack of vision and his refusal to change the GM culture of behemoth, gas guzzling, unreliable and poorly constructed road hogs.
In order for GM to survive, he had to go. Good for President Obama.
Shows that the Obama administration believes that GM can make it through, but not without new leadership that will make the required changes in order for GM to make American cars that are competitive.
Chrysler is another story. See ya Chrysler.
Eric
March 30th, 2009
1:00 pm
They should have been forced into a structured bankruptcy 6 months ago. Instead, we poured billions down a hole and wasted 6 months, and they will end up exactly where they should have been in the first place – bankruptcy.
They cannibalized future demand with all of their deals of the past few years. The economy simply cannot support 3 American automakers, and the longer GM and Chrysler are allowed to sleepwalk towards Chapter 11, the more likely they will take Ford with them. Ford is obviously the best run of the 3, so let the others fail and let Ford pick up the slack.
Corporal
March 30th, 2009
1:02 pm
caz1158:
Don’t forget someone who is “brainwashed” doesn’t know it. You’re arguing with a wall.
G
March 30th, 2009
1:03 pm
Let’s get real: GM has to change their wrongheaded culture and President Obama came to some of the same conclusions that this consultant did -
http://www.umtri.umich.edu/content/RetoolingGM.pdf
mm
March 30th, 2009
1:04 pm
Same old talking points from the trolls.
The automakers have 2 weeks to put a plan together or file bankruptcy. The unions somewhat hurt the companies, but the execs ran them into the ground.
Corporal
March 30th, 2009
1:05 pm
I predict the “Economic Talicrats” are in for a big surprise for the next Congressional election. Just make a note of this post, date and time, and we will discuss it again then. If I am wrong I will stand corrected. Don’t worry, I won’t forget.
Corporal
March 30th, 2009
1:06 pm
……… and the CEO of the US has never even run a business.
ByteMe
March 30th, 2009
1:06 pm
Another part of the reason Wagoner was told to take a hike was that he had 90 days to get concessions from the bondholders and unions that would make the company viable and reduce their debt by 2/3rds. Didn’t happen and he didn’t seem to know if/when it would happen. He became part of the problem at that point. The administration was right to make his departure (as well as getting those agreements) part of any agreement for future funding.
DB, Gwinnettian
March 30th, 2009
1:07 pm
It seems to me that the union CEO has done a fine job of making worker concessions during this mess. Why would he need to be fired?
And there’s the little matter of the UAW never having asked the taxpayers for a bailout.
But don’t bother getting in between a conservative troll and the shiny-new talking-point.
Midori
March 30th, 2009
1:07 pm
mm,
they know it’s all the union’s fault, cause Rush told them so.
Dusty
March 30th, 2009
1:08 pm
Well, wouldn’t you know? Jay Bookman is for extortion! Get going, CEO, or I will not give your company any money.
Kidnappers do this in reverse, i.e. hold the person until you pay us. Maybe GM should have tried that.
In the first place, government should never have been giving funds to private industry.
If GM fails, it should be on their own.
The President of rht USA should be running the government, not private business.
Now we have a man with no business experience being advised by a man who forgot to pay his taxes. That is whom is trying to run private business owned by American stockholders.
Jay Bookman, who is no business expert either, wants to say how great it is to have Obama meddle in a self-made mess aided by a liberal led Congress. Yep, that’s a liberal Nirvana if I ever heard of one.
caz1158
March 30th, 2009
1:08 pm
Corp- UAW never saw a STRIKE they did’nt like. When begining job training,new hires were taught was correct way to hold strike signs,proper abusive language to be yelled at those who chose to cross picket lines,& last but not least,moaning about hours & pay. Something to be proud of,and teach our children!
Midori
March 30th, 2009
1:09 pm
the last CEO of the United States ran SEVERAL businesses.
Right into the ground.
and the US as well.
Rush Limbaugh for President
March 30th, 2009
1:09 pm
I Report,
What is your point? You copy and paste and scream socialist without making a point. A few questions;
Do you think Wagoner should not have been forced to resign under any circumstances?
Do you think he should have been forced to resign if the plan he submitted for GM to get more money was unacceptable?
Wagoner has been at GM for 30 years and has be CEO since 2000. Is he part of the problem or part of the solution?
How does any of what Jay said make his position that of a true socialist?
Corporal
March 30th, 2009
1:12 pm
HEADLINE: “Obamas to use own cash to redecorate White House …”
This is somewhat “eyewash” (do you realize how much free food, travel, and other expenses they get?) but I commend them for it.
It a far cry better than the Clintons who tried to steal White House furniture. Remember when the U.S. Archives truck was sent to New York to bring it all back? Oooops!
Wyld Byll Hyltnyr
March 30th, 2009
1:12 pm
The problem is not in requiring Wagoner to resign as a condition precedent to a possible bailout, rather the problem lies in the public spectacle.
The Obama administration, from the lynch mob pursuing certain AIG employees to, now, Wagoner and, on soon, to others,has taken on the patina of post revolution France. Anyone with one shread of class and the desire to act in the most effective and productive manner possible would have asked Wagoner to resign and let him do so. Instead, President Obama creates a public spectacle that will ultimately benefit no one. Already, I have heard the cries for Gettlefingerstein, the union head. This is but an unnecessary side show that is not productive. No wonder the european press has taken to calling our president Ob-amateur.
Perhaps the president would be better served to use his bully pulpit to orchestrate public hangings for tax cheats (Rangel, Geithner, Daschle, and on…) or those sucking to heavily on the lobbyist teat (Rangel, Dodd, Frank, Rahmbo, and on…) or those who are McCarthy-like in their actions (Rangel, Frank, Conrad, and on….)
To see our great nation reduce to the “show trial” level of tinpan dictators and 1970s communist regimes is most distressing, but, all too unfortunately, the hallmark of the Ob-amatuer administration.
Corporal
March 30th, 2009
1:13 pm
caz1158:
I used to watch engineers drink beer all day while running the engines and throw the empty cans out the window. If management had tried to fire them, the Union would have fought it all the way.
Wyld Byll Hyltnyr
March 30th, 2009
1:15 pm
Midori 1:09 pm
One of our family trusts had a small, inconsequential investment in the Rangers. That investment had an admirable return that was, I assure you, not indicative of a business run into the ground.
No matter how many times you bleat otherwise, President Bush was a fine and successful businessman.
Corporal
March 30th, 2009
1:15 pm
P.S.
I had to testify once in a termination hearing (just before I went in the USMC) as I was present one night as the front brakeman when a totally drunk engineer tried to pull two hundred loaded cars out of the yard without releasing the air brakes. They fired him. Two years later he got his job back with all back pay.
DB, Gwinnettian
March 30th, 2009
1:16 pm
I Report,
What is your point?
To get you to notice his imbecilic posts, of course.
The opposite of love is not hate, it’s indifference. Just sayin’.
Corporal
March 30th, 2009
1:18 pm
President “Goodwrench” strikes again.
caz1158
March 30th, 2009
1:21 pm
Corp-I’ve been in the Auto Indusrty since 1979,both corporate and on the retail side. I can tell you that the least productive,me first,clock watchin,company hating,ready to walk at the drop of a hat employees were union members. Don’t miss them at all. Sad to say,but management help create this monster.
Bosch
March 30th, 2009
1:22 pm
Corporal,
Just because YOU used to be a member of a sucky union, and watch some bad things – doesn’t collectively make all unions suck. It just ain’t so.
One thing, unions don’t run the business – they don’t get to decide which things get produced – they don’t deal with the marketing, they don’t deal with R&D (I think).
I’m glad Wagoner is gone – now on to the others.
caz1158
March 30th, 2009
1:24 pm
Corp-If something had happen accident wise,you know the lawsuits would have been aflowin. But not at the union,nooooooooooooo, but at the company.
G
March 30th, 2009
1:24 pm
People railing against union workers don’t know what they’re talking about. They didn’t make the decisions about which vehicles to make, their design, and all the things which assist in making a company prosper.
Management did.
caz1158
March 30th, 2009
1:27 pm
G-It’s a toatal screw-up. You can’t just blame one group,I agree. But the unions have been getting a pass for years,and they ain’t no ANGELS!!
Dave R
March 30th, 2009
1:31 pm
DB Gwinnett, please. You actually think that the UAW didn’t ask the government for a bailout? What do you think all those union leaders were doing with VP Hope & Change down in Florida at their swanky meetings last month? This is payback time for Hope & Change, and he’d better produce. We all know it would be better for GM to go down the tubes and let another car company rise from the ashes – one without the chains of the union around their neck, but Hope & Change can’t say that without getting into hot water with his puppet-masters at the union.
And G, to your earlier question:
“When will the Rushpublicants in Congress who presided over the ruination of our economy summon the honor to resign?”
I think they’ll do so, right after we see Barney, Dodd, Pelosi and Reid go first.
Midori
March 30th, 2009
1:31 pm
I’m going to post this Frontline link again (Just for you, Wild Bill):
http://www.pbs.org/wgbh/pages/frontline/tentrillion/
Eleanor Rigby
March 30th, 2009
1:32 pm
Everybody wants to blame the unions for the automakers’ problems but if you are in the market for a car you will notice American cars are not that much more expensive than foreign cars, particularly Japanese cars. Apparently the problem is not that Americans can’t afford to buy American cars. There must be some other reason. Poor management I say.