Obama and GM: You Break It, You Own It

Posted: Apr 01, 2009 12:00 AM

GM, now renamed Government Motors, has a new CEO: President Barack Obama. By replacing the head of the company and demanding a restructuring of its board in return for further financial TARP aid, Obama has taken upon himself the responsibility for the future of the company. As Gen. Colin Powell said when Bush was considering invading Iraq and toppling the Saddam Hussein government, "If you break it, you own it." Now it is Obama's company.

This move will backfire big-time! The auto giant is very, very unlikely to be saved by this current TARP infusion. Doubtless, it will need more in the near term. But the resentment now focused on the management of the company will then turn to Obama. Having demanded a replacement of the management, it is he who will be held responsible for the company's future.

And, each time GM asks for more money, Obama will face a choice: take personal responsibility for laying off 100,000 autoworkers or anteing up the additional cash. By intruding himself so deeply into the management of the company, Obama makes himself central to its future. If Obama lets the company fail, having already extended credit, he will have all of Michigan on his case. If he keeps coming up with more and more tax money, he will earn the contempt of the voters.

Socialism has its price. By taking over the management of a company, you become the determinant of its fate in the public's mind.

Obama does not seem to realize that government takeover is the beginning, not the end, of the problem. He should have stuck with being president and leave making cars to others.

And, as the new CEO of General Motors, what will his policy be on corporate compensation? Will the public tolerate his letting his new company pay salaries sufficient to attract the talent necessary to salvaging the firm? Or will he have to rely on a bunch of kids right out of school, willing to work for one or two hundred thousand a year, for the company's salvation?

When it comes to the hard work of cutting retiree health benefits, reducing salaries, laying off workers and closing plants, is Obama willing to resist calls for his intervention? Is he up for getting the blame for all the "heartless" measures GM will have to take to salvage its future? He has put himself squarely in a position to pay a steep political price for his assumption of power in GM.

Most troubling is the sense that Obama cannot have thought this through. He can't have planned this. President Clinton used to say at strategy meetings that we needed to think three or four moves ahead and not just "kick the can down the road." Obama is clearly not following his predecessor's advice.

He realized GM needed money. He knew the public would have a fit if he gave it. So he decided that he would appease his electorate by exacting blood from the company's management and directors by using his guillotine on some of its old grey heads.

But, had he thought before he acted, he would have realized that it would have been far better to have criticized GM from a distance even as he extended more money rather than to, in effect, take over the company.

The president's protestations that the government does not want to own a car company are quite beside the point. It's his now, and he better figure out what to do with it.