Detroit News and Free Press: Government Now Runs Auto Industry

By March 30, 2009Economy

From The Detroit News:

Editorial: Rick Wagoner’s ousting had more to do with politics than his ability to revive GM

Well, at least now we know who’s running General Motors. The Obama White House, in an extraordinary expansion of the government’s reach, Sunday demanded and got the head of Rick Wagoner, the automaker’s embattled chief executive. In doing so, the president brushed aside GM’s board of directors, selected by shareholders and entrusted with the power to hire and fire executives, and assumed that role for himself.

While GM’s board had been often restless with the transformation of GM under Wagoner’s leadership, it maintained its confidence in his ability to get done a very tough job.

Shareholders can read the handwriting on the wall — this isn’t their company anymore.

That’s the risk you take when you go hat in hand to Washington. It ought to be a red flag for other companies and industries that might be thinking a federal bailout is the answer for surviving the recession.

From The Detroit Free Press:

U.S. can’t run auto companies

The risk was there from the start.

The federal money flowing to Detroit to help struggling automakers was always going to come with strings.

But there’s a fine line between holding General Motors Corp. and Chrysler LLC accountable for a pile of taxpayer cash and inappropriate government efforts to actually run the companies.

President Barack Obama’s Auto Task Force may have crossed that line over the weekend, when it asked for GM Chairman Rick Wagoner’s resignation and demanded that Chrysler link up with Fiat in 30 days, or give up on any more government aid.

It’s hard to see how either move is far shy of actually running the businesses. And if that’s the case, if the auto companies’ federal overseers have decided they’ll make managerial as well as financial decisions, this sets an awful precedent, both on general principle and in these particular instances.

Join the discussion One Comment

  • david foster says:

    Interesting that a hard line was taken with GM/Wagoner,. but a much softer line with the banks. Ken Lewis of BAC, for example, is still very much with us.

    Any thoughts as to the reasons for this differential treatment? I suspect it’s at least partly due to the fact that the world of people who make and sell things is utterly alien to the crew now running Washington.

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