Detroit is the center of the universe this week. The Final Four will take place there on Saturday and Monday evenings, with local team Michigan State fighting for the national championship. Yesterday, President Obama made a surprising announcement on the fate of the domestic auto industry.
Here is the Detroit Free Press this morning, Obama turns up the heat
WASHINGTON — President Barack Obama took charge of Detroit’s auto industry Monday, vowing to transform it into a world leader in fuel-efficient vehicles — but demanding a plan of action within two months.
Obama compared the decline of Detroit to a natural disaster, saying it deserved the same kind of emergency attention. But he warned that, within 60 days, General Motors Corp. and Chrysler LLC would either be on a path to independence or on their way out.
What kind of businesses are we talking about when it comes to GM and Chrysler? What are we looking to potentially invest endless billions in? The picture is pretty grim, according to Consumer Reports 2009 Auto issue,
Overall, the Detroit automakers build just 19 percent of our Recommended vehicles.
Consumer Report ranking of Top 15 automakers
#14. GM: “GM has made big strides wth good performers. But too many older models drag t down. Reliability is not consistent.”#15. Chrysler: “Chrysler, which tied with Suzuki for last place in our 2008 ranking, fared even worse this year. No Chrysler, Dodge or Jeep vehicles are recommended this year.”
Back in December I wrote that, a managed bankrupcy is the only solution that makes sense. Yesterday, for the first time President Obama signaled just that,
President Barack Obama warned that saving GM and Chrysler — if it completes a deal to link up with Italy’s Fiat — may require using bankruptcy “as a mechanism to help them restructure quickly and emerge stronger.”
“Our strong preference is to complete this restructuring out of court,” GM said in a statement after Obama’s speech. “However, GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.”
Glad to hear that, although I don’t quite believe it. Remember, with Obama, there is a huge difference between his words and deeds. David Brooks, who recently had his Obama awakening, is skeptical that Obama has this fight in him,
And yet by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck. Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline “Obama to Middle America: Drop Dead� It would take a party with a political death wish to see this through.
He is right to be skeptical. Obama has never stood up to powerful interests. He has never shown that kind of political courage. Those, like Brooks, who said Obama could be a transformational leader were doing so on the basis of one thing. Hope. There is simply no record of political courage on his resume.
One of conservatives biggest criticisms of bailout mania has been government interference in private markets. Many oppose this notion of protecting and propping up failed institutions. They argue that is a bad approach and the best way is to the let the market sort these things out. Sink or swin on the merits of the business. As Detroit is finding out, that philosophy is much easier to implement with a manufacturing company than it is a financial services company.
If President Obama is truly serious about a managed bankruptcy, Republicans should get behind him 100%. A managed bankruptcy means inviting an epic battle with the United Auto Workers. Obama, if serious, will be taking on the unions in a way no Democrat has done in generations. He would be allowing market forces to work. These company’s stink. Their costs are permanently misaligned and their products for the most part do not compete. This seems to me the best of a bunch of bad options. If Obama goes through with it, it is time to support him.
If he retreats in the face of withering criticism, well, that’s just Barack being Barack.
UPDATE: Holman Jenkins has a great piece in the WSJ today. He’s says no way will Obama stand up to the UAW and he expalins why.