President Obama says he’ll help GM and Chrysler but they’ll have to agree to some “pretty drastic changes.”
“We will provide them some help,” Obama said. “I know that it is not popular to provide help to auto workers — or to auto companies. But my job is to measure the costs of allowing these auto companies just to collapse versus us figuring out — can they come up with a viable plan?” He added: “If they’re not willing to make the changes and the restructurings that are necessary, then I’m not willing to have taxpayer money chase after bad money.”
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“Everybody is going to have to give a little bit — shareholders, workers, creditors, suppliers, dealers — everybody is going to have to recognize that the current model, economic model, of the U.S. auto industry is unsustainable,” Obama said.
The president said he agreed with a questioner at the town hall — a Maryland woman with family members who work for GM and Ford Motor Co. — that “there’s been a lot of mismanagement of the auto industry over the last several years.”
Obama stressed that the industry must be preserved, not only symbolically but because of the large number of jobs connected to the companies and suppliers. Obama said his job was to protect U.S. taxpayers and he wouldn’t spend federal dollars on “a model that doesn’t work.” “A lot of it’s going to depend on their willingness to make some pretty drastic changes. And some of those are still going to be painful,” he said.
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The president said that even as the economy bounces back, Detroit can’t focus on “trying to build more and more SUVs and counting on gas prices being low.” In that vein, the administration on Friday is expected to announce plans to raise fuel efficiency standards by 2 miles per gallon to 27.3 mpg for new cars and trucks in the 2011 model year, an administration official said Thursday. That would be the first increase in passenger car standards in more than two decades.
Under the changes, new passenger cars will need to meet 30.2 mpg for the 2011 model year and pickup trucks, sport utility vehicles, and minivans will need to reach 24.1 mpg, according to the official, who spoke on condition of anonymity because the person was not authorized to speak in advance of the announcement.
White House spokesman Robert Gibbs said Obama will announce his strategy for the auto industry before he leaves for Europe on Tuesday. The announcement is likely to come on Monday. Gibbs said Obama still thinks U.S. automakers build cars that Americans want to buy. Both he and the president own Ford Escape hybrids. “It’s a nice car,” Gibbs said. “It really is.”
After speech to the Atlantic Council last evening, EU Commissioner for Competition Neelie Kroes was asked how she would handle this very question were she in charge of the U.S. economy. She noted that she didn’t have to put herself into any hypothetical situations, because they’re facing exactly these decisions in Europe, too. And her answer is similar to Obama’s: No help for industries that ran themselves into the ground with poor management decisions unless they come up with a radical restructuring plan that recasts the business to compete successfully for the long term. And, yes, that includes being “green” for sustainability.
Obama’s absolutely right that, if the federal taxpayer is going to bail out these companies, then the government has a right to insist on major restructuring. He’s wrong, though, and Kroes is right on how to get there.
While the government employs some really smart people with substantial knowledge of economic matters, it has no specialized expertise in how to run an automobile company. To be sure, the people actually running GM and Chrysler haven’t exactly shown themselves as geniuses in that regard. But, to be fair, they’ve been operating under the pressure of quarterly shareholder reports and hamstrung by a labor structure from a bygone era, which makes it difficult to make good strategic choices.
So, absolutely, Obama’s people (and/or Congress) should approve a restructuring plan before giving the auto companies another dime. But the auto companies, not the government, should draw up the plan.
