Animadversions.

The weblog of Joshua Drescher

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GM bloodletting.

March 30th, 2009 · No Comments · Politics

Obama has flexed his muscles (or his wallet’s muscles) and forced out the CEO of GM and demanded a revamped board in exchange for more sweet, sweet bailout cash.

I am of two minds on this.

Mind One (the one that stills wears Obama ‘08 shirts around the house from time to time): Hell Yeah!

After months of being cautious to the point of spooking markets and demolishing confidence, as well as moving by inches in the hopes of finding the most conservative solution possible to the complete meltdown of the entire world economy, the Obama Administration is doing something definitive, aggressive and strong. No more half-measures, no more “fire-and-forget” bailouts that wind up being used for bonuses or executive retreats, no more tepid half-steps aimed at avoiding excessive entanglements in private corporations while subsidizing their continued incompetence.

Instead, put a financial gun to their heads and explain that there’s now only One Way Out - it’s Obama’s Way or the highway (where their cars will get a disappointing 20 MPG on average).

Weird waves of optimistic hypotheticals wash over me. GM, decoupled from crippling debt, restructured to compete with Toyota and Nissan and… well… every other foreign auto maker. Additionally, given a mandate to stop dragging their heals on the release of things like plug-in electric vehicles while ALSO being promised support by federally-funded infrastructure projects aimed at building the kind of service grid necessary to make those vehicles attractive to consumers NOW, instead of 20+ years from now. This ushers in new Renaissance in US manufacturing. People living in places like Detroit and Flint and all the other long-suffering areas that were once hubs of the US automotive industry are - at long last - given relief and hope and a better future.

But then there’s THIS guy:

Mind Two (the one that had a hard time warming to Obama for most of the campaign): OH GOD, WHAT IS HE DOING?

Let’s be honest here - Americans have a short attention span and the window of time where the Obama Administration will be able to continue leaning on the “we inherited these problems” crutch is rapidly closing. GM is in such rough shape and so addled with debt that the chances of any politically safe solution actually working are maddeningly slim.

The fact of the matter is that GM will almost certainly need to declare bankruptcy in order to survive. In doing so, they will leave thousands of bondholders in the lurch in addition to forcing all sorts of concessions from labor in order for the automakers to safely emerge from bankruptcy.

It was going to suck for the Administration to have that happen on their watch, but they’d probably have been able to squeeze on last “we inherited this problem” pass out in order to mitigate the damage. But NOW, this is officially Obama’s Problem. It’s going to be HIS CEO and HIS board of directors that steer GM towards the very-nearly-inevitable state of bankruptcy. Every debt that’s defaulted on, every Union job that gets cut or restructured, every Little Old Lady who somehow held GM bonds will become 100% Obama’s Fault. And there won’t be much wiggle room for the Administration to dodge the charge.

The GOP has been sharpening the long knives, waiting for something like this to happen. They’ll make him feel every lost job, every disappointing failure, every defaulted debt and every penny of share price that’s lost as a result of this decision. Barring a magnificent and unprecedented turn-around by GM, Obama is essentially handing them a Solid Gold Bar of Awesome to use in campaigns from now until 2012.

Then, of course, there’s the other looming political disaster. Namely, the Administration needing to explain why GM - a stalwart part of America’s proud, blue-collar manufacturing establishment that really had almost nothing to do with the current state of the economy - is being singled out for harsh treatment while executives from AIG and the like are being allowed to keep their jobs AND take home millions in bonus pay. I get that there are nuanced explanations - practical, legal, political and otherwise - for why AIG keeps getting the Kid Gloves, but you can rest assured that NONE of those explanations is going to get even the slightest traction in the minds of most Americans once the GOP starts building a narrative around Poor, Abused General Motors and how the Socialists are punishing her unfairly.

Maybe it’ll all work out, but it’s sure going to take an unbelievable run of perfectly-executed decisions and pure, dumb luck to make it happen.

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