Monday, March 30, 2009

GM CEO Rick Wagoner Forced Out by Obama

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GM's Chief Executive Rick Wagoner has been forced to resign by the Obama administration as one price for accepting bailout money. While not without precedence, this development may be part of a trend of government power over the private sector.

Rich Wagoner had presided over GM's accruing billions of dollars in losses and in the plummet of the price of GM stock. Rick Wagoner was excoriated in the press, attacked by politicians of all persuasions, and even lampooned on Saturday Night Live.

Rick Wagoner will be replaced by Fritz Henderson, the company's vice chairman and chief operating officer. The ousting of Rick Wagoner, who was seen as moving too slow to address the structural problems causing the hemorrhaging of GM, is seen as just the start of a massive series of changes at GM. A new board of directors, for example, will be elected by August.

The government will also now be handling warranties for American made cars during the period of restructuring. Hotair's Ed Morrissey suggests that this arrangement will bring about all of the efficiency and customer service of the Department of Motor Vehicles to a process hitherto handled by car dealers.

That changes being brought about at GM are necessary is beyond dispute. There is some doubt, though, that the federal government is competent enough to determine what those changes are and, having done so, effectively implementing them. In a poll conducted in December, Rasmussen found that just 14 percent of the respondents thought that the government could do a better job running the big three automakers.

The heavy involvement by the government in the way automobile companies are structured and operate represents a kind of socialism in all but name. It is true that the government will not own the means of production of cars, but it will in fact enjoy all the rights of ownership due to the leverage it enjoys with its bailout program.

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This arrangement contains considerable political peril for Barack Obama. If GM or any other car company fails or even if it continues to falter, Obama will now own that failure. It will be Obama's handpicked executives who will preside over what happens to GM. If GM still goes under, it will be considered a government failure and not a private sector one.

A better solution would have been to allow the big three automakers to go into bankruptcy, with the government passively guaranteeing car warranties—without creating a bureaucracy—while the car companies restructured and renegotiated contracts. But that would have involved the government eschewing an opportunity to seize power and when was the last time that happened?