Morning Bell: Car Salesman in Chief

[Lt-Col A. Tack]

Morning Bell: Car Salesman in Chief

* Posted March 31st, 2009 at 8.06am in Ongoing Priorities.

On April 8, 1952, President Harry Truman ordered Commerce Secretary Charles Sawyer to seize and take over operation of most of the country’s steel mills. Truman cited no legislative authority for his actions. Instead, he cited the Korean War. Truman claimed there was a national emergency and his presidential war powers were all the authority he needed to nationalize the steel industry. The steel companies fought back, and in the landmark case Youngstown Sheet & Tube Co. v. Sawyer the Supreme Court found Truman’s actions to be unconstitutional.

Justifying President Barack Obama’s unprecedented control over the U.S auto industry, an administration official told Politico: “We’re in an economic crisis, which takes shared responsibility and shared sacrifice. The only way that we will recover is if everybody puts a little skin in the game.”

Unlike Truman, Obama actually has some legislative authority to hang his nationalization hat on: the Emergency Economic Stabilization Act of 2008, which created the Troubled Asset Relief Program (TARP) funds that Obama is using to control General Motors and Chrysler. But, as we argued at the time, the broad delegation of powers in the bill makes it constitutionally suspect.

Did any member of Congress voting for EESA really even contemplate that the bill would lead to a President of the United States saying this:

In this context, my administration will offer General Motors adequate working capital over the next 60 days. During this time, my team will be working closely with GM to produce a better business plan. … I am confident that if we are each willing to do our part, then this restructuring, as painful as it will be in the short-term, will mark not an end, but a new beginning for a great American industry; an auto industry that is once more out-competing the world; a 21st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us toward an energy independent future.

As great of a lawyer, community activist, and law professor as President Obama may have been, when has he ever run any company or come up with a single business plan. Now he’s running General Motors?

But Obama didn’t stop at auto company CEO:

No one can deny that our auto industry has made meaningful progress in recent years. Some of the cars made by American workers are now outperforming the best cars made abroad. In 2008, the North American Car of the Year was a GM. … just in case there are still nagging doubts, let me say it as plainly as I can –- if you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it’s ever been. Because starting today, the United States government will stand behind your warranty.

Did we elect a president or a car salesman? Problem is, when we let the government become a market participant, there is no difference.

Hence the slew of other incentives Obama threw at the auto industry.

Back in November we argued that bankruptcy was the best option for General Motors. But others argued that General Motors needed more time to prepare for a filing. Its now four months later and the Obama Administration is now claiming GM should have another 60 days. This political charade must end. No President of the United States should be selling cars out of the Grand Foyer of the White House. It’s embarrassing. Bankruptcy is still the best policy for General Motors and Chrysler.

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[gammbino]

Heh, when was the last time non-delegation was used to strike down a federal law...is "save us from economic ruin by whatever means possible" an intelligible principle? Unfortunately, under EESA, there is not much the Executive can't do, thatis until public opinion starts to change. I heard someone saying that this isn't socialism, but rather economic facism. Let the means of production remain in private hands but government controls how resources are used.

GM Bankruptcy? Tell Me Another.
The President isn't serious about reform for detroit

http://online.wsj.com/article/SB123853988781575499.html

President Obama rightly says "sacrifices" must be made if GM is to emerge as a viable company. But there's one sacrifice he won't make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.

Keep that in mind amid the defenestration of Rick Wagoner, who was not as popular with UAW Chief Ron Gettelfinger as Mr. Wagoner's replacement, Fritz Henderson. Keep that in mind amid reports the administration favors a "quick and surgical" bankruptcy. It's a bluff. The same administration that inserted itself into GM's corporate governance to order the resignation of a CEO is hardly likely to defer to the prescribed legal order for a failing company, namely bankruptcy. Even a "prepackaged" filing runs too much risk of a judge imposing more "sacrifice" on the UAW than the administration is prepared to tolerate.

GM bondholders understand this: They've been intransigent precisely because they calculate the UAW is too important to Democratic electoral politics for Mr. Obama to risk losing control of the reorganization process to a bankruptcy judge.

The GM bailout has become a political operation run out of the White House. It will stay that way. Talk of UAW layoffs already disguises the fact that UAW workers are actually offered generous buyouts and early retirement -- they aren't just sent away with a last paycheck. What about Chrysler? A few weeks ago, Fiat was saying it would consider a merger if a loan from Washington was guaranteed. Now Washington is saying a loan will be forthcoming as long as Fiat does a deal. That's not an ultimatum -- that's a nod and a wink.

Mr. Wagoner did more than any GM executive to deal with the cursed legacy of 75 years of too much government attention. Not for him, though, and not for Team Obama, the real solution to make GM "viable": Getting rid of its North American business to end its UAW captivity.
That captivity, imposed by the 1935 Wagner Act, is the sole relevant factor distinguishing the Detroit Three from the world's other auto makers. The result is downright weird: "Our" auto companies operate in a world that's less "American," in a sense, than the Japanese and German companies that come here and enjoy a free labor market.

The Wagner world was given a second lease on life by a peculiar feature of Congress's 1975 fuel economy law. Known as the "two fleets" rule, it effectively forces Detroit to make its cheap small cars in high-wage domestic UAW factories, even if it means losing money on every car. The rule has no fuel-economy function. Its only purpose is to shield the UAW monopoly inside each Detroit auto maker from global labor competition.
You wouldn't have noticed, but a legislative accident two years ago almost stripped away the two fleets rule. A couple of Republican senators from the South took the lead in crafting the Senate's new fuel economy bill, and built it to please Nissan, which had railed against two fleets for its own reasons.

In the final bill, to no one's surprise, two fleets was quietly restored by Rep. John Dingell and Illinois Sen. Obama (among others) as a political favor to the United Auto Workers.

The UAW's Mr. Gettelfinger had testified, coyly, during Congressional hearings that failing to renew two fleets might cost 17,000 auto workers jobs building small cars. He didn't say that two fleets is in fact the fulcrum by which, for the past 30 years, the UAW has been able to defeat globalization.

He didn't say two fleets was the sine qua non for the past generation of the UAW's power to suck the Big Three dry.

Mr. Obama played the tough guy in getting rid of Mr. Wagoner, but he won't go after the labor monopoly. In fact, the union will emerge with a stronger grip on Detroit -- because it will be a major shareholder in a reorganized GM.

The irony is that Detroit has given plenty of evidence that it can make money, even with UAW overhead. Three of the top seven best-selling vehicles in February were Ford, Chevy and Dodge pickups.

Better than trying to rewrite GM's business relationships -- the job of a bankruptcy judge -- Mr. Obama might take up the duties of a president. He might try giving the country a coherent auto policy for a change. He could repeal two fleets so Detroit could build its small cars profitably offshore and tame the UAW monopoly in the process. He could dump CAFE or impose a $5 gasoline tax so at least customers would have a reason to buy the cars Washington is forcing Detroit to build.

None of this will happen. Mr. Obama will be content with incoherent policies that poll well -- which means GM, Chrysler and perhaps Ford eventually will need taxpayer subsidies as far as the eye can see -- or until a real bankruptcy sometime after November 2012.

One more point on the bold parts. Hybrids aren't exactly flying off the shelves right now, nor are they really a long term solution to our energy problems (why doesn't anyone talk about the environmental problems associated w/ producing the sh*t ton of batteries needed and the hazards they will present at end of life, not to mention the abysmal gas mileage they obtain compared to diesels and other small cars, or the fact that the electricity used to charge the electric motors comes from coal fired power plants...but I digress). If the President's plan doesn't really solve the union problem and doesn't solve the problem of Detroit building cars Americans don't want, how on earth are they going to become profitable companies capable of being removed from the government teat in the future?