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Friday, June 19, 2009

The Government's "Passive" Role in Car Ownership

Here's a story that hasn't gotten much attention.

General Motors Corp., operating in bankruptcy since June 1, is consulting daily with President Barack Obama’s auto task force on plans to sell the company’s best assets, Chief Executive Officer Fritz Henderson said.

Henderson, who met today in Detroit with Edward Whitacre Jr., GM’s next chairman, also said the automaker appears ready to meet the bankruptcy court’s timetable to exit Chapter 11. GM is preparing for a June 30 hearing on the sale of assets such as its Chevrolet, Cadillac and Buick brands to a new, government- backed company.

Selling those brands will separate the valuable parts of GM from assets such as unwanted dealer contracts, allowing a new automaker to be operating by the end of August. Chrysler LLC sold its best assets to a group led by Fiat SpA on June 10 to create Chrysler Group LLC in the same type of court process



It's important to look back now at what the president said just a few weeks ago.

But Obama insisted that the federal government will not be involved in GM’s day-to-day operations.“What I am not doing, what I have no interest in doing, is running GM,” he said.

“They, and not the government, will call the shots and make the decisions about how to turn this company around,” he noted. “In short, our goal is to get GM back on its feet, take a hands-off approach and get out quickly.”


Newt Gingrich said something very intuitive about President Obama. He said that when analyzing the president's policies one needs to ignore his words and look at his actions. This was illustrated in the president's recently released Financial Regulatory overhaul. This is a sweeping overhaul. He creates several new regulatory bodies. He puts all sorts of financial institutions under new financial regulation. He gives the Fed all sorts of new powers. He wants to manage the nebulous concept of "systemic risk". Yet, the president then characterizes this overhaul as having a "light touch".

Now, we have yet another example of his words not really matching his actions. When the president claimed that the government would be a passive investor in the automakers, this was nonsense. In the view of the president, by passive, he means that his rep would have nearly daily contact with the CEO of GM.

2 comments:

Anonymous said...

Mike, this can hardly be called GM's "day-to-day" operations. We're talking about Obama's task force communicating with Whitacre, who is Chairman of "New" GM about what assets to buy. This isn't about day-to-day operations, this is about the actual shape of the company the government is creating with its money.

mike volpe said...

Henderson is speaking with Whitacre. Ratner is speaking with Henderson. Besides that, you are effectively right.