Why Obama Could Be The Best Thing For Detroit Since Henry Ford Page 3

By John Voelcker

John Voelcker

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And support for that idea has come from an unexpected source: No less a personage than Bob Lutz thinks the industry will be better off after restructuring. He even had good things to say about the automotive Task Force, saying he thinks it should become a permanent fixture of the government.

7. He understands industrial policy

Unlike his predecessor, Obama appears to understand industrial policy and its place in national security. While the auto industry may no longer employ 1 in 12 Americans, it will remain a huge multiplier of jobs.

Many feel the president's goal oft-stated goal of 1 million plug-in vehicles on the road by 2015 is overly aggressive. But few observers deny the strategic importance of maintaining an industrial base that can invent, design, build, and sell complex electro-mechanical products.

The White House has been very supportive of measures to assist companies that plan to establish US manufacturing of automotive lithium-ion cells and the battery packs that house them.

8. He doesn't want to stay an owner or meddle

Finally, the president has said quite clearly that the US should own stakes in the automakers for as short a time as possible.  And he has pledged not to micromanage their day-to-day operations.

“What we are not doing — what I have no interest in doing — is running G.M.,” Mr. Obama said in his speech. And his advisor Steven Rattner was more specific yet, saying, “No plant decisions, no dealer decisions, no color-of-the-car decisions.”

This resolve will be tested soon, with decisions like whether GM should move out of its Renaissance Center headquarters in decaying, dysfunctional, downtown Detroit. It could easily consolidate its surviving staff into available empty space at its suburban Warren Technical Center, but Detroit civic leaders are fighting any idea of such a move.

More challenging yet will be decisions over whether GM could import cars from low-cost China and, if so, how many. We suspect Obama knows he is well advised to stay clear of such decisions, but time will tell.

Exit strategy?

In the end, people of good faith will disagree on whether the US automakers should have been saved. But by now, that train has left the station.

What remains to be seen is how long US (and Canadian) taxpayers continue to own 60 percent of GM and 8 percent of Chrysler, or whether they we'll be asked for further funds down the line.

If more dollars are requested, then Obama will have betrayed the principle he articulated the day GM filed. He was quoted in The New York Times saying the government would take a hands-off approach to managing GM and divest its stock as soon as possible.

Even pithier, he said his three goals were,  “To get GM back on its feet, take a hands-off approach and get out quickly.”

Quickly versus most profitably

That "quickly" part poses a challenge. The longer the new GM has to stabilize, succeed, grow, and prosper, the more value taxpayers are likely to realize.

An economic analysis in The New York Times summarized it this way:

So, just as George Bush spent much of his presidency seeking a way out of Iraq, Mr. Obama may spend much of his seeking a way out of the morass of new government investments in the private sector. The hardest part will be knowing how to time the withdrawal of government support — a balancing act between maximizing the investment of taxpayers and risking the company’s fragile state.

When the US government took over six bankrupt freight railroads in 1976 and merged them to form Conrail, similar howls arose to those now being heard over the auto industry. But Conrail was streamlined, taken public in 1987, and ultimately returned a profit to the Treasury.

The global auto market may not return to previous sales levels for another two or three years, and when growth resumes is even murkier. But when it does, Obama's actions should make the US automakers--GM, Chrysler, and even Ford--much better positioned to compete.

That possibility is clearly viewed by Obama and his team as the greatest good for the greatest number of Americans. Time will tell whether he was right.

Will GM Be Conrail, or Vietnam?

A final question: If, after all of this, GM remains unable to make compelling and competitive vehicles and convince consumers to buy them, will the Obama administration (or its successor) pull the plug? Or will GM become Obama's Vietnam?

We don't know the answer to that one. Obama may, but he's not telling us. We hope Fritz Henderson (and/or the next CEO of GM) knows how far the government will--and won't--go.

However that plays out, we believe Obama's actions preserved a viable, US-owned auto industry at a time when its survival was in very real doubt.

Time will tell on that one too.

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