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The Government and GM: How Reluctant a Shareholder?

Posted By James Gattuso On June 1, 2009 @ 2:11 pm In Economics | Comments Disabled

President Barack Obama speaks to the nation before General Motors CEO Fritz Henderson speaks to the media at a press conference to announce company plans to seek federal bankruptcy protection at the GM Building in New York City on June 1, 2009.

Will the new majority owner of General Motors — the United States Government — take an active role in managing the firm as it struggles for viability? In a statement [1] earlier today, President Obama insisted that the government wouldn’t impose it’s own political agenda on GM.

“What we are not doing, what I have no interest in doing, is running GM,” he declared. Calling the government a “reluctant shareholder”, he declared that “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… When a difficult decision has to be made like where to open a new plant or what type of new car to make, the new GM, not the US government will make that decision”.

This sounds reassuring, but in fact this non-interference pledge was broken even before he started speaking. The White House was already trumpeting [2] a pledge extracted from GM to “build a new small car in an idled UAW factory”, furthering the President’s environmental goals as well as pleasing his labor allies.

This is unlikely to be the last case of active management from the reluctant shareholder. Already pressure is building from the left to limit GM’s manufacturing in China, and even from some Republicans to limit dealer terminations. Like a Cadillac in the living room, the government’s ownership of GM won’t go unnoticed, and the power it confers will be exercised.

The only way to limit government control of GM is to limit government ownership. If ownership can’t be avoided, President Obama must at least establish a firm — and early — termination date [3], making clear when and how this company will be returned to private control. While such an exit strategy would not prevent the reluctant shareholder from becoming active, it would stop it from being permanent.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/06/01/the-government-and-gm-how-reluctant-a-shareholder/

URLs in this post:

[1] statement: http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-on-General-Motors-Restructuring/

[2] trumpeting: http://www.financialstability.gov/latest/05312009_gm-factsheet.html

[3] termination date: http://www.heritage.org/Research/Regulation/wm2462.cfm

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