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The Accidental CEO

The way things are going these days, owning a car company is not the best way to win friends and earn trust. And owning a bankrupt General Motors is, to put it lightly, a bit of a political and economic risk. Which may be why President Obama this morning immediately cast himself as a reluctant owner who won't be micromanaging.

After an infusion of $50 billion in taxpayer money, the American people now have a 60 percent equity stake in the carmaker. Obama insisted that both the bankruptcy and the public stakes were necessary to restore GM to competitiveness and ensure the survival of the domestic auto industry.

Virtually every decision facing the behemoth company will adversely affect one important constituency or another. And many of Obama's priorities -- such as bringing the company back to profitability, treating workers fairly and dramatically improving fuel efficiency -- may be in conflict.

From his remarks:

What we are not doing -- what I have no interest in doing -- is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They -- and not the government -- will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.

In short, our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.

The Wall Street Journal editorial board this morning outlined the downsides:

Welcome to Obama Motors, and what is likely to be a long, expensive and unhappy exercise in political car making....

Every decision the feds have made since December suggests that nonpolitical management will be impossible....

The Administration promises to wield a light ownership hand, but it's only a matter of time before Congress starts to micromanage GM's business judgments. Every decision to close a plant will be second-guessed, much like a military base-closing....

Mr. Obama likes to say he's a pragmatist who only prefers a government solution when it will work. But in resurrecting an industrial auto policy that even the French long ago abandoned, the President has made himself GM's de facto CEO. Our guess is that he'll come to regret it as much as taxpayers will.

Quite significantly, the New York Times editorial board this morning shared many of the Journal's concerns, if in a more sympathetic way:

President Obama owes American taxpayers and voters a candid and detailed explanation of the government's goals and the levers it intends to use to achieve them....

The decisions of G.M.'s new managers should not become entangled with the government's other policy priorities — such as maximizing employment in the United States or reducing job losses in Michigan. And he should specify what is supposed to happen if the goals of profitability and fuel efficiency collide.

The old saying, "What's good for General Motors is good for America," has never seemed like such a double-edged sword. And Obama also clearly appreciates the symbolism.

I recognize that today's news carries a particular importance because it's not just any company we're talking about -- it's GM. It's a company that's not only been a source of income, but a source of pride for generations of autoworkers and generations of Americans. But while the GM of the future will be different from the GM of the past, I am absolutely confident that if well managed, a new GM will emerge that can provide a new generation of Americans with a chance to live out their dreams, that can out-compete automakers around the world, and that can once again be an integral part of America's economic future. And when that happens, we can truly say that what is good for General Motors and all who work there is good for the United States of America.

By Dan Froomkin  |  June 1, 2009; 1:59 PM ET
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I call a BS on Obama, and demand that Froomiekins get a little tougher on his favorite president.

Obama says that he is not interested in running GM... yet he contradicts himself in the same set of remarks that they would resist making decisions, except for the most FUNDAMENTAL ISSUES. Fundamental could very well mean what car lines GM will focus on, R&D, and produce. Where new plants will come online or close. Yes Government Motors CEO BHO will not be deciding on paint templates, when window washers will work, or sponsor a company picnic.... but fundamental decisions will ultimately determine how GM can come back. If the public doesn't like the changes or the purchasing options... then it will take longer for the company to come back than the overly optimistic estimate from Obama.

Also, how is the government not deeply involved with GM, when they demand that GM present restructuring plans to be reviewed the last 4 months, assign a 31 year-old Obama staffer to map out the dismantling of GM, and essentailly set the timetable for GM's closure and not allowing the company to deal with the Chapter 11 courts in a normal business fashion. Delaying what seems to be the inevitable may have hurt GM more than Obama's fans could realize.

Posted by: alutz08 | June 1, 2009 3:53 PM | Report abuse

The Republicans seem to be dumber now than they were in 1933 - at least Hoover declared a bank holiday to keep the country from failing - Hoover's Secretary of the Treasury actually worked out the law under which the banks would reopen. Now the Republicans say that all they want the Democrats to do is shut down the country see what happens. Oh, and make additional cuts to government revenues by cutting taxes on the people who can afford to pay taxes and cutting the nominal corporate tax rate in half. Then balance the budget by ending Medicare, Social Security, food stamps, and children's health care while doubling the military budget and increasing corporate subsidies.

Posted by: dickdata | June 1, 2009 4:04 PM | Report abuse

Accidental CEO????? Puh-lease froomie....

Who dictated that the prior CEO resign only to be replaced by a puppet interim CEO that essentially is overseaing the failure of the company? Obama.

Who told W one week after the end of the election to give GM bail-out money and not let them enter bankruptcy on their own? Obama.

Who demanded revisions to business restructuring proposals brought forth by GM and Chrysler? Obama.

Who was publicly annoyed with GM debt holders that refused to agree with the adminstration's plans to relieve/forgive the GM debt obligations and negotiated ownership deals for the UAW Union? Obama.

Despite the above... how can someone say that Obama is a reluctant or accidental CEO?? Obama from his very first week after being elected put himself in the driver seat of the two auto makers.

A little over a week ago... Obama exclaimed to an excited political fundraising crowd on the West Coast, "You ain't seen nothing yet."

After what has happened to GM, I think that many of those affected by Obama's GM decisions don't want to "see" what else Obama has in store for them.

Posted by: alutz08 | June 1, 2009 4:10 PM | Report abuse

Excuse me... dick...

what does your political diatribe have to do with whether obama's assention to head GM??

By the way... did the Constitution allow for the government to provide anything and everything for the people, while at the same time regulating everything you can and cannot do? Answer: It doesn't. Limited power for the Federal level, and most of the powers fall to the states.

Posted by: alutz08 | June 1, 2009 4:15 PM | Report abuse

Excuse me... dick...

what does your political diatribe have to do with whether obama's assention to head GM??

By the way... did the Constitution allow for the government to provide anything and everything for the people, while at the same time regulating everything you can and cannot do? Answer: It doesn't. Limited power for the Federal level, and most of the powers fall to the states.

Posted by: alutz08
So, alutz, you'd rather GM failed and collapsed altogether?
I guess you don't believe there are no good solutions to this problem, only bad and worse ones.
I believe that Obama would rather not be in the car business; it would be one less headache to deal with. But the problem is, millions upon millions of jobs depend upon GM staying in business, bankrupt or not.
GM will now stay in business.
Millions of people will stay employed.
The economy will NOT collapse by just that much.
Of course, if you'd rather go back to the Republican utopia of the market solving all ills... but no, we are not there. If we were, millions upon millions of Americans would have lost their life savings and their retirements when the market collapsed--a collapse overseen by the same numbskulls who thought the housing bubble was a good thing.
Limited power at the Federal level?
Don't be naive.
We have the means to pass laws and even amend the Constitution to deal with today's problems, not those of the late 18th century. If you'd rather live in the past, by all means, go ahead--but the rest of us have to deal with today's problems.

Posted by: drewbitt | June 1, 2009 4:22 PM | Report abuse

GM's fat cat directors run the company into the ground and its Obamas fault? Yeah right. I saw GM destroy the company i worked for, in 1984 GM after taxes had 25 billion on hand, they bought EDS and Hughes aircraft. In 1985 they were 25 billion in the hole. That is a 50 billion dollar swing. At the end of 1985 GM laid off close to 50,000 employess and closed 5 plants and the board of directors gave themselves big raises. When Ross Perot who was on the board of GM at the time raised this issue, they voted him off the board. I give Obama credit for trying to save thousands of jobs. But i have no sympathy for GM.....

Posted by: rharring | June 1, 2009 4:27 PM | Report abuse

My husband has said, "Why doesn't the government employ the auto workers to build high speed rail cars for a more efficient way to travel." I guess it's the oil companies who are keeping gas driven cars on the road. If GM can build a better car, why haven't they already?

Posted by: sailorflat | June 1, 2009 5:23 PM | Report abuse

President Obama should be more accurately described as a reluctant CEO, rather than an accidental one. Alutz08 is right to have reservations about the Federal Governments involvement (or if one prefers, interference) with the restructuring of GM.

However, I don't believe that the President fundamentally wants to micromanage GM. The situation that we face economically, which is far beyond that of trying to salvage GM, is not a Democratic or Republican issue. President Bush began the unprecedented action of Federal Government intervention, and Obama has had no choice but to follow suit.

Ultimately, the success of economic recovery depends upon a delicate balance of government involvement and, under certain circumstances, a hands-off approach which allows market forces to realign and stabilize certain elements of the economy.

That approach cannot avoid inflicting pain to the unfortunate Americans who get caught in this dynamic. Auto workers, including those who are involved in manufacturing parts, are going to get hurt irrespective of the level of governmental involvement (consider the plant in Fredericksburg, VA that produces parts for power trains that will close as a result of the restructuring of GM - it will unfortunately join 13 other plants across the country that will have to close).

Republicans can be a part of a constructive solution by offering positive alternatives to proposals and programs initiated or proposed by this administration. It would certainly beat the wasted energy of sulking and negative criticism. Cries of "socialism" without offering solid counter proposals doesn't benefit anyone (it certainly does nothing to enhance their political standing either).

One way or another, an economic shakeout was probably inevitable. For years, there have been too many car companies, too many dealers, and too many parts suppliers in this country - I have believed that, even before the credit crisis, that this was not sustainable over a long term. But that does not mean that I have a callous attitude toward those who stand to lose their livelihood.

Posted by: MillPond2 | June 1, 2009 6:12 PM | Report abuse

I think this is a no-win for Obama. And I like that.

Posted by: mmourges | June 1, 2009 9:30 PM | Report abuse

You know, when my car breaks down or acts up I say it's on the Fritz!

Posted by: samellison | June 2, 2009 1:11 AM | Report abuse

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