Set Broad Goals
In the late 1970s, I worked for then U.S. Secretary of Transportation Neil Goldschmidt in the Carter Administration. We were there for the second oil embargo, the Chrysler bailout and the flood of Japanese imports that signaled the arrival of global competition in the auto industry. Under Secretary Goldschmidt's lead, we put together a set of initiatives the Carter Administration could use to support the auto industry, from the Big 3 to suppliers and dealers.
Secretary Goldschmidt presented these proposals at an economic policy meeting, but the Council of Economic Advisers chair Charles Schultze swatted away his ideas. Schultze argued that the fastest growing sector of the U.S. economy hadn't been autos--it had been indoor-outdoor carpeting! So if the government was picking winners and losers, he said, it shouldn't help the auto industry. It should invest in indoor-outdoor carpeting.
Today, we've jumped that philosophical hurdle. Nobody bothers arguing the pluses and minuses of industrial policy anymore--we just put major corporations into Chapter 11, feed them tens of billions of dollars and entrust their guidance to young, not-yet-minted law students. Where's Charlie Schultze when we need him?
Let's start with what the government can't do. On a day to day basis, it makes no sense for the federal government to "operate" General Motors. I'm not even sure what that would look like. Would the administration approve hiring and firing decisions? Set advertising buys? Approve marketing campaigns? Probably not.
On the other hand, the federal government has been an invisible presence in Detroit for a long time. Fuel economy standards, safety standards, employment guidelines, air quality requirements, and more all come under the review and guidance of Washington, DC.
My guess is that the Obama administration doesn't want its fingerprints on any serious operating decisions. That way could lead to political--and economic--suicide.
Setting broad goals? Check. Establishing ambitious energy and environmental objectives? Check. Making sure GM doesn't do anything untoward in newly sensitive areas like compensation and bonuses? Check.
In some ways, the important question is a different one: Not how and whether the government will run GM, but how and when the government will end its participation in owning and bailing out the company. What is the exit strategy, and what measures does GM need to meet before the Obama administration can set it free again? At that point, what's good for the Obama administration will be good for General Motors.
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