After the Treasury team was finished with their “Where’s Waldo and What’s he Driving” mission, Steven Rattner, the private-equity executive leading the team, said, “Plans won’t include a comprehensive fix for the two companies. That will largely be left to the stakeholders, such as unions, management and investors.” You’ll notice that Mr. Rattner didn’t include GM and Chrysler customers as stakeholders. Perhaps that’s because the current customer, the one supplying GM and Chrysler money, is the Federal Treasury.
I also noticed that Rattner led with the union as its first stakeholder. Big Labor is the current elephant in the oval office and wandering around wherever policy makers gather inside the Beltway. Card check is working its way through Congress, we’ve stiffed Mexico for the teamster bosses, and the UAW has made sure every Democrat knows where their support comes from.
Following the Detroit visit, Rattner opined that “I don’t think that bankruptcy is necessarily a better place for any company,” suggesting that more cash and oversight was the best solution. And recent statements from the newly convened task force indicate that the Obama administration will lend GM and Chrysler more money if they secure sacrifices from their managements, unions, and GM’s bondholders. But GM CEO Rick Wagoner, someone who has resisted Chapter 11, seems to be reconsidering this option. Apparently, Rick has realized that whatever perception the damage a bankruptcy filing might cause GM, it has already occurred with the volume of negative press the company has endured.
Of course with a managed reorganization, the fate of the union and bondholders would be in the hands of a bankruptcy judge and there’s a chance that a court may make decisions that are favorable for the health of the company. With the administration and Congress in its pocket, the UAW has little reason to negotiate, and that strategy appears to be working for them, at least in the short term.
As I write this, I’ve just finished testing the 2010 Chevrolet Camaro. It’s a terrific car, with plenty of power, superb handling, and excellent fuel economy. But even if General Motors survives, there’s no assurance that Government Motors will allow such a vehicle to exist, since it doesn’t come with a power cord or deliver 50-MPG.
So even if our homegrown automakers endure or are kept on life support by public money and Beltway oversight, there’s an uncertain motoring future ahead for consumers — you know, the people who used to be stakeholders in the industry. Between ownership and/or aggressive regulation of the former Big Three, the future automotive products may not be what we want to buy.
Of course, other automakers should fill the product void, unless we decide that limiting imports is the best way to protect American jobs. Besides, if we taxpayers end up owning all of GM and Chrysler, we’ll have to protect our investment. That’s what this kind of meddling can bring, and it’s a lot less fun than letting markets work so that people can have real choices.