Chrysler was given 30 days but has wasted no time, as this report of a new partnership with Fiat formed on the same say as Obama's announcement shows.
GM can now see the handwriting on the wall clearly. The company's new CEO said Tuesday that bankruptcy by the end of the 60 days the President gave GM to get its house in order is now "certainly more probable." The United Auto Workers, which has stalled and waffled and only reluctantly made some concessions -- in the expectation that Democrats would stave off the inevitable -- now finally must face the inevitable with a hard deadline.
I argued back in November when the initial auto bailout proposal came up that a bailout was necessary, particularly of GM, for the sake of the wider economy, even though Detroit's repeated failures are infuriating. I also said that such a bailout "should be approached as if it were a Chapter 11 bankruptcy restructuring, with a special federal official...much like a bankruptcy judge, given wide latitude to force the companies and their employees' unions to downsize, reshape cost structures, and focus on a return to profitable operations." I think that's subtantively pretty much what Obama has done. We will see soon enough.
However, his forcing out of GM's long-time CEO, Rick Wagoner, may prove to be a mistake. I understand why he did it; with public anger at Wall Street big shots unabated and polls showing that big majorities of 10 Americans oppose the auto bailouts, he had to do something dramatic to hold GM and its management responsible in a highly visible way.
The trouble is that Wagoner's ouster sets the perception in concrete that the Obama Administration is now running GM and responsible for the outcome, whatever it may be. We can be sure that the UAW is not going down without fighting another round -- and that could mean mobilizing friendly Democrats and other unions to pressure Obama and Congress to go soft on what needs to be done at GM. If they succeed and Obama caves, it could mean very substantial additional sums of taxpayers' money funneled into GM while it still doesn't make itself fully competitive.
I hope that won't happen. Sp far, Obama is on the right track but needs to stay on it.
What do you think? Post a comment.