President Obama said Monday that the U.S. government had no interest in taking an ownership stake in General Motors Corp. But faced with two other bad options -- letting the legendary automaker fail or simply extending more government loans that would add to the company's strangling debt burden -- he had no choice...
But Obama's decision to take the unprecedented step of assuming ownership of a major manufacturing company opened him up to sharp criticism that he was nationalizing the automaker. The Republican National Committee quickly dubbed the company "Government Motors."
"No matter how much the president spins GM's bankruptcy as good for the economy, it is nothing more than another government grab of a private company and another handout to the union cronies who helped bankroll his presidential campaign," Republican National Committee Chairman Michael Steele said...
Obama directly rejected criticism from some small bondholders that the United Auto Workers union received a more generous deal in exchange for giving up some of the debt GM owes to a retiree healthcare trust.
But Mark Modica, 48, business manager at a Saturn dealership in Doylestown, Pa., said he thought the UAW did better than small bondholders like him...
"We have retirees on our side who are losing their retirement, but it seems like the retirement of the people in the union is being protected," he said. "I don't think there's a doubt there was preferential treatment."
Despite Obama's vow to be a hands-off investor, the government's majority interest in GM opens up the White House to political pressures on key company decisions. The auto task force has already been lobbied by some members of Congress who want to keep GM plants in their districts open.
Other legislators are pushing back against the plans by GM and Chrysler, which the administration also forced into bankruptcy, to ax hundreds of dealers...
But the Obama administration said its ownership of GM won't extend to operational decisions. Those will be left to the company's board, a majority of which the administration will choose from seasoned business executives...The notion that the government is merely a passive investor is, of course, a fiction. Management may have nominal freedom to make decisions, but nobody needs to be explicitly told where the bread is buttered.
The charge that Obama rewarded UAW retirees -- who many Americans blame for the collapse of GM -- at the expense of less politically savvy retirees, will, I think be very effective politically as faces are put on the dis-favored class.
The more interesting, to my mind, political exposure for Obama is his call for smaller, greener cars. Most Americans, in particular those in sub-, or ex-, urbia with families need bigger cars. The Prius is a car for urban singles. If three years from now family-sized cars are more expensive, or harder to come by, it will be easy to blame the President. This sort of attack stands to be particular effective given its easy relation to many existing lines of attack: Democrats being over-eagerness to intervene+politicize the free market/make choices for people, Democrats lacking understanding of family values, etc.
Republicans would be wise to be careful to avoid statements predicting the GM's failure. GM's failure is in no one's interest, and rooting for it is dangerous politically. Further, should GM succeed it ought not become an excuse, or template, for further, more expansive, politicization of the economy. It is, of course, far from clear at the moment, that "republican" and "wise" are two words that can be safely joined in a sentence.
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