Obama's Tough Love for Detroit
The White House hard line is just what the auto industry (and the market) needs. How did Republicans become the party of coddling underperforming CEOs?
Something important was missed yesterday in all the news about General Motors. I’ll give you a hint: Which U.S. president fired GM’s CEO, and which one left in place the man who presided over some of the biggest flops (both financial and products) in the failing car company’s history? Now, which U.S. administration made incisive and direct comments about the causes of GM’s malaise, and which administration made happy talk about the small-town joys of automobile manufacturing?
You know the answer already, so I’ll just skip to my real questions: How did the Democrats become such hard asses about firing underperforming CEOs of underperforming companies that take government money? How did the Republicans become the party of coddling the same underperforming CEOs? Why is it that Republicans want to give billions of dollars to messed-up banks and autos companies so that the same screw-ups who screwed-up can screw around some more? How can it be that some of the most thoughtful and incisive analysis of the roots of GM’s problems have come in a report this week from the Obama administration?
Wagoner was given three crazy-vague things to do by President Bush back in December, and he didn’t complete any of them. Not one.
Not to put too fine a point on it, but what the hell has gone wrong with the world when the reasoned economic thinking is coming from the left and the cuddly stuff is coming from the right? Next thing you know we’ll find out that the U.S. debt has grown faster under financially hawkish Republican administrations than under predictably spendthrift Democrat administrations. I mean, where would that leave us? But wait, that’s true too. Does nothing make sense anymore? Next thing you know that loon Glenn Beck will have a hit TV show.
Most of what people said should happen in bailouts—fire underperforming management teams, credibly threaten bankruptcy, set real goals, and then nail management’s ass to the wall if it misses them—has now happened in the auto bailout. And it has created a mess. After all, how does one remain tirelessly partisan when you, as a Republican, say, are forced to defend a CEO like GM’s Rick Wagoner?
Granted, Wagoner is, by all accounts, a nice enough guy, but he was given three crazy-vague things to do by President Bush back in December, and he didn’t complete any of them. Not one. He didn’t even credibly bluff that he had. How do you get to stay CEO without being able to find some MBAs to help you make that sort of stuff up?
And it gets worse. Because according to the auto-viability assessment released on Monday, GM CEO Wagoner’s turnaround plan was more like a “dancing in place” plan, with losses stretching out to the horizon, or at least until 2014. The predictions were deemed optimistic, the strategies late and slow, and overall Wagoner came off as a trustafarian who’d spent the last few months skiing at Vail.
Now, however, Republicans must defend him. Of course, they are mostly settling for caviling noisily at the idea of the Obama administration getting all statist and socialist by telling GM that Wagoner had to leave. That’s wrong, huffed a procession of congressional Republicans today.
Of course it’s wrong. Tell us something we don’t know. Does anyone really want the administration picking management teams at public companies? No way. Judging by the pace at which open Treasury positions are being filled, your average billion-dollar company would end up staffed by a CEO, some secretaries, a few summer students, and some photo-copier abusing temps.
Saying it’s wrong, however, doesn’t say what we should do instead. What does Congress propose the administration do? Keep pumping in money while appointing some fellow-traveler bloggers to run GM? Put John Boehner in charge? Await further instructions? Who knows, because the Republicans are deafeningly quiet with practical ideas with respect to handling failing bailout recipients, like GM, and their management.
Of course, the ambidextrous ironies of the current situation work both ways. Democrats are out of their comfort zone, too. Watching a parade of Democratic congressional sorts applaud as Obama implies that both a GM and a Chrysler bankruptcy are very likely in our future is surreal. You imagine them next hiding from their assistants waving cellphones with calls from livid Rust Belt mayors who see the remnants of their manufacturing base turning into Toyota parking lots.
The auto-industry bailout shows how the economic problems have created a political mirror-world. Instead of bipartisanship, we now have gender-bending trans-partisanship, with everyone crossing the aisle at once and occupying the other party’s still-warm seat. If only for the sake of Fox News and others trying gamely to defend the financially indefensible, let’s hope it stops right here.
Paul Kedrosky is the editor of the business blog Infectious Greed. He's a senior fellow at the Kauffman Foundation, where he is focused on entrepreneurship, innovation, and the future of risk capital. He is also a strategist with Ten Asset Management, a Southern California institutional-money-management firm.