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Who Do We Want Running the Car Companies?

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By Eva Rodriguez
Sunday, May 3, 2009

"I don't want to run auto companies," President Obama said last week. "I'm not an auto engineer. I don't know how to create an affordable, well-designed plug-in hybrid." To those of us who still quaintly believe in the power of private enterprise and free markets, that was a reassuring answer from the leader of a country heading toward owning 8 percent of Chrysler and 50 percent of General Motors. It suggested the president understands that, even with their lousy track records, business professionals are better equipped than government bureaucrats to decide what cars to make, what prices to set and how many people to employ.

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Seconds after that promising, if relatively vague, opening, though, Obama took much of it back. He couldn't help himself. "But I know that, if the Japanese can design an affordable, well-designed hybrid, then, doggone it, the American people should be able to do the same," he said. "So my job is to ask the auto industry: Why is it you guys can't do this?"

So much for hands-off. George W. Bush may have been this country's first MBA president, but Obama is on the brink of becoming its first CEO in chief -- and that would not bode well for Chrysler, GM or taxpayers.

There's nothing wrong with Chrysler and GM building fuel-efficient green cars -- if they can make money. I'd have no problem whatsoever if one of them manufactured a pink, snout-grilled mini-car that ran on manure -- as long as it proved profitable. (I wouldn't buy one, mind you, but I'd smile and wave as you drove by.)

My goal as a taxpayer is to see that these companies earn enough so that they return my tax dollars as soon as possible. And what if green cars aren't the way to go? What if market research and consumer surveys show that as long as gas costs only $2 a gallon, U.S. drivers will stick with the true road hogs, our SUVs? And what if CEO Obama doesn't like these answers because they don't jibe with his goal of reducing greenhouse gases?

It's entirely legitimate for a president to encourage, coax and cajole private actors to adopt his policy preferences. It would be even more appropriate for the president and Congress to provide incentives to really nudge these changes along. A gasoline tax akin to the ones that keep prices high in Europe and spur purchases of fuel-efficient cars would make a lot of sense. It would also draw howls of protest, which is why Obama instead appears to prefer to lean on the car companies.

And why not? Obama controls the funds they need just to stay alive, making it highly unlikely that the companies will simply ignore his suggestions and incur his wrath. As they have learned, there's a price to pay for not minding him. In March, Obama sent Chrysler and GM back to the drawing board and threatened to withhold additional money if the companies did not come up with more ambitious reorganization plans. He was also responsible for the inglorious exit of GM chief executive Rick Wagoner. It isn't that far a leap to think that Obama might -- or at least might be tempted -- in the future to use his financial leverage in similar ways.

Lawmakers, too, will undoubtedly try to insinuate themselves into the boardroom. One may try to block plans to further whittle down the workforce. Another may try to put the kibosh on shutting down dealerships in his back yard. Before you know it, they will be dictating what kind of fuel injection GM may install and how many union members will be needed to install it.

Which brings us to another disturbing aspect of the government's dealings: its unabashed and unwise attempts to tilt the scales in the unions' favor. The government proposed giving the United Auto Workers' retiree health fund a 55 percent equity stake in Chrysler -- more than the combined stakes of Chrysler's merger partner, Fiat, or the other creditors that are owed roughly $7 billion. At GM, the plan is for the union to take a 39 percent slice -- a rich reward for years of work rules, health care and pension deals that contributed mightily to the company's financial woes.

Obama has said he hopes to get out of the car business soon, and he has urged private investors to replace the government as the source of ongoing funds. But no executive in her right mind would take that gamble when it is clear that, in dealing with the government, private capital will always take a back seat to politically powerful entities. Bankruptcy -- which everyone has dreaded until now -- may prove an unlikely balm. Chrysler filed for Chapter 11 last week, and GM may be facing a similar fate. At least in this arena, long-established rules, and not political favoritism, will play a pivotal role in deciding who gets what. It will also bring some business discipline to decisions that will shape the companies -- and, I hope, enable them to pay back every red cent I'm owed.

rodrigueze@washpost.com


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