The 535 New Directors of GM

Posted: Jun 05, 2009 11:48 AM
One of the many problems with the federal government controlling a private company like GM is that each Congressman in Washington will be looking our for their own state or district's interests -- even if that works against the interest of the company they are running.

Take, for instance, Massachusetts Congressman Barney Frank. Congressman Frank put a call into GM CEO Fritz Henderson on behalf of a GM distribution center in Norton, MA that was slated for closure as part of GM's restructuring plan. After talking with the Congressman, the decision to close the center and put about 90 people out of work was reversed. I'm not faulting Barney Frank for his actions--no Representative wants to see closures in his or her district, but this exemplifies how unsuited the federal government is in running private enterprise.

Here's what the Wall Street Journal had to say about it:

"Mr. Frank's spokesman, Harry Gural, says the Congressman discussed, among other things, 'the facility's value to GM.' We'd have thought that would be something that GM might have considered when it decided to close the Norton center, but then a call from one of the most powerful Members of Congress can certainly cause a ward of the state to reconsider what qualifies as 'value.' A CEO who refuses the offer can soon find himself testifying under oath before Congress, or answering questions from the Government Accountability Office about his expense account."

Not only will decisions like plant closures be made now by politicians – politicians vulnerable to political influences particularly when they’re up for re-election every two years – but so will such decisions like what kind of technology to use in manufacturing.

In a great editorial by the Washington Post this week, GM's New Owner: What kind of deal did you get?, the editors write:

"In practice, the political manipulation of the company has probably only just begun; Democratic Rep. Eliot L. Engel (N.Y), for example, has declared that the government should require GM to install "flex fuel" technology in its cars. If GM still isn't profitable enough to attract private investment a couple of years from now, the pressure will be intense to shovel even more public money into it. Administration officials say they hope and expect that this $30 billion for GM will be the last. But they don't promise, because they can't."

We need to take a good hard look at this government power grab. Not only is it unprecedented and unconstitutional, it will ultimately prove disastrous.