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  • Government Motors: Exit Strategy Needed

    Heritage fellow James Gattuso:

    Congratulations: If you are a U.S. taxpayer, you will soon be a part owner of a car company.

    Under the latest reorganization plan for General Motors, Uncle Sam would take ownership of 72.5 percent of the troubled automaker while providing an additional $30 billion in funds to the company.

    The proposed deal would give Washington controlling ownership of a major industrial corporation for the first time since Conrail railroad was sold in 1986. And, along with the pending acquisition of a minority stake in Chrysler, it would represent the first time the U.S. has ever owned an automaker–joining China and several European governments in that club. It is a road less traveled, for good reason, and one America needs to exit.

    Ownership, acquired through a government-dominated bankruptcy process, is the wrong approach. GM and Chrysler should be restructured under established bankruptcy rules–without taxpayer money or the federal control that comes with it. But if government ownership does take effect, President Obama and Congress should outline a clear exit strategy for taxpayers, as well as clear guidelines on how the firm is to be run in the interim. Among the necessary steps:

    • Establishing a firm, legally binding deadline–perhaps one year–for the sale of the firm back to the private sector.
    • Establishing an expedited schedule for repayment of outstanding federal loans. The repayment should extend no more than 36 months.
    • Prohibiting any further taxpayers loans or grants to GM.
    • Adopting clear guidance for GM’s management and for federal officials overseeing the corporation, making clear that during the period of government ownership, establishing market value and viability, rather than social or political goals, are to be the primary objective.
    • Strictly barring GM during the period of government ownership from making any campaign contributions or engaging in policy advocacy of any kind. Due to its ties to government, GM’s role in the political arena while nationalized should be strictly circumscribed.
    Posted in Economics [slideshow_deploy]

    2 Responses to Government Motors: Exit Strategy Needed

    1. Barb -mn says:

      President and the congress should stay out of the private sector and mind their own business. His plan resulted in bankruptcy which shows his lack of intellect and concern of the people of America.

    2. ROY, ORANGE CA says:

      The UAW says they made major concessions but will not give details of these so call major concessions. We the people, as major owners of GM should be entitled to know the details of these concessions? GM will not ever be successful again unless the UAW cost is at the same level as other vehicle manufactures. Is it?

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