In Ousting GM's Wagoner, President Obama Shows His Muscle

President Obama speaks about his administration's new policy for General Motors, giving the auto giants working capital for 60 and 30 days to come up with a plan to become viable in the long term. Video by
By David S. Broder
Thursday, April 2, 2009

Last week's edition of the Economist, the shrewd British journal, had a lead editorial expressing serious misgivings about Barack Obama. "His performance has been weaker than those who endorsed his candidacy, including this newspaper, had hoped," it said.

"Despite his resounding electoral victory, his solid majorities in both chambers of Congress and the obvious good will of the bulk of the electorate, Mr. Obama has seemed curiously feeble."

Had the editors of the Economist waited a few days, I doubt they would have made that judgment. On Sunday night and Monday morning, word leaked out of Detroit that G. Richard Wagoner Jr., the veteran CEO of General Motors, was stepping down immediately at the behest of the White House.

The next day, Obama made it clear that Wagoner had been pushed out (along with most of GM's board of directors) as part of the strict terms the president was laying down for a 60-day extension of the bailout loan the Bush administration had provided last year to help the staggering automaker avoid bankruptcy. Obama also declared that if GM's creditors, workers and suppliers did not deliver the concessions the administration task force thought necessary, no further taxpayer-financed aid would be forthcoming.

In addition, Obama announced, Chrysler would have only 30 days more to work out its merger with Fiat or it, too, would be ticketed for bankruptcy.

It was a dramatic show of muscle, targeting two of the erstwhile Big Three, and the economic mainstay of the city of Detroit and the state of Michigan, which rank among the top five political pillars of the Democratic Party. Michigan's Democratic governor, Jennifer Granholm, protested that Wagoner was being made a scapegoat. But Sen. Carl Levin commented that when Obama met with members of the Michigan delegation, he made plain that "there wasn't much point in arguing whether or not it was fair or unfair, wise or unwise. It was a decision that he didn't ask us about; he informed us."

You can hear in the comments of Levin and other members of Congress the sounds of grudging admiration for a fellow politician who has shown them he has more backbone than they expected.

The most dramatic example of that kind of reappraisal in my experience was supplied by Ronald Reagan in the summer of 1981, his first year as president. PATCO, the union representing government employees who were air traffic controllers, presented a series of contract demands including $10,000-a-year pay increases and shorter hours to relieve the strain of their high-tension jobs.

When negotiations stalled, PATCO threatened to strike, despite federal law forbidding it. When the union carried out its threat, Reagan gave its members 48 hours to get back to work, warning that those who stayed out longer would be fired.

The union gambled that Reagan would not run the risk of disrupting air service and aggravating so many business travelers. But it lost. Twelve thousand of its members -- all but the few dissidents who stayed on the job -- were summarily fired. When the strike effectively collapsed after five days, Reagan barred the rehiring of the strikers for any government jobs.

It was a catastrophe for organized labor because it stiffened the resistance of many private employers to unionization. But for Reagan it was all benefit. He had always been well liked. But he had never been feared -- until he broke the PATCO strike. From that point on, Democrats and Republicans alike thought twice about challenging him.

It is possible, I think, that ousting Wagoner and the GM directors will have a similar effect for Obama -- but only if he enforces his other deadlines and conditions.

As the Economist editorial suggests, he needs to show his muscle. He has been overly accommodating to Congress. To protect the prospects for his priority legislation on health care, energy and education, he allowed Congress to write its own version of the stimulus package and signed a catch-up budget swollen with the kind of earmarks he campaigned against.

He has softened his demand for middle-class tax cuts and appears to be bowing to critics in both parties who oppose his cap-and-trade approach to climate control.

Until Obama zapped the head of that iconic American institution, GM, the impression was growing that this was a guy you could roll. As Reagan showed, you're a lot better off if you kill that notion early.

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