I'm soliciting opinions. Is the Obama administration doing the right thing in dealing with the economy? I see some places where I believe the administration is fumbling and places where it is doing what it needs to do.
I'm nervous about the American auto industry, particularly when the administration seems to be making corporate decisions in exchange for stimulus money. Is conditioning the receipt of stimulus cash on the resignation of the CEO of GM prudent? I know the main argument in favor - that if we are going to take an ownership interest in a failing automaker, the government should act like a shareholder and be active in guiding the company. How far does this argument go, though? Will the Treasury Department decide what cars GM will sell? Will it help to price the vehicles? Will it dictate the number of employees GM needs to do all of this? I'm not sure the federal government has the expertise to make those kinds of calls. Even with an Auto Industry Czar, how can we be certain that our representatives will do a better job than institutional private investors who employ industry analysts that constantly track the health of a company.
Would it be a better use of stimulus money to encourage purchasers to buy American with larger tax credits, particularly for those buying smaller (let's face it, less profitable), more fuel efficient vehicles (including foreign makes that are built in the U.S.), or does that amount to naked protectionism that will result in a downward spiral of global protectionism?
I think about the old adage that a little knowledge can be dangerous. Because of the urgency of the problem (and the threat of bankruptcy that would leave unionized and non-unionized workers with very little protection) I am trying not be overly critical of an administration that works for the guy I voted for. I am suspicious of the Republican message that we ought to go down the bankruptcy road.
The big problem, beyond people being unable to afford any new car, much less an SUV, is that GM, Ford and Chrysler have never really crawled out of the trench of lower resale values and the widely-held perception that American cars are not nearly as reliable, well-built or fun to drive as Hondas, Toyotas and other Japanese and German brands. If they can change that perception, I think they can be profitable with or without federal assistance. No government program is going to change those perceptions.
What do you think?
2 comments:
Often, changes in management occur because that change is perceived as action, and unfortunately perception IS reality. I am conflicted in the move of the government to force the resignation of a CEO, but I think it is more of a perception move than a reality move. I believe the Auto Industry is in trouble due to 3 things: 1. artificially low oil prices that discouraged the development of smaller, more fuel efficient vehicles 2. Government policies that did not call for increased fuel economy standards and rewarded the purchases of large vehicles instead of energy conserving vehicles 3. The short-sighted business plans of the auto industry.
I think the debate between letting the GMs & Chryslers of the world go bankrupt is a valid one, and it is one that I am certainly not qualified to answer. But maybe from this point forward we should re-think the policies that allow companies to grow "too big to fail".
I think you are spot on in listing the reasons why American automakers are in the position they're in. By the way, you are as qualified as anyone to give an opinion on the potential for a bankruptcy solution. Plenty of people who hold themselves out to be economics experts weren't exactly warning us of the possibility that we would be in the spot we're in right now. My father's widow has worked for a Delaware based GM plant as an hourly employee for about 30 years. She didn't take the buy-out they offered a couple of years ago and now I'm worried that a bankruptcy will screw her out of her full pension and retiree health benefits. It's an absolute tragedy that some of the most important promises an employer makes can be wiped away in bankruptcy court but an individual is no longer able to wipe out their own debts. Thanks for commenting.
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