Monday, March 30, 2009

He Means Business

Rick Wagoner, the CEO of General Motors, is being forced out of his job, and Chrysler is being told to get a move on with their merger talks with Fiat as conditions for further bailout assistance from the government.

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.

President Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy — a quick, court-supervised restructuring, as they described it — could still be an option for one or both companies.

I’m sure a lot of people — especially some on the right — are going to be wondering just what right the federal government has to tell a company what to do and who’s to run it. But when the companies come to the government for assistance — in this case, nearly $20 billion — then one of the trade-offs has to be that the lenders — in this case, the U.S. taxpayer — gets to set the terms of the agreement. It’s not a hell of a lot different than going through bankruptcy court; they’re just not calling it that.

Not surprisingly, the editorial board at the Detroit Free Press is not happy about this. Their lede today is “U.S. can’t run auto companies.” Well, it seems that neither can the auto companies.

As for the question as to why is Mr. Wagoner being forced out when the banks such as Citi and Bank of America escape such drastic measures? Josh Marshall has some thoughts.

Citi does not have the same CEO it did at the start of the crisis. And the government installed a new CEO at AIG after the initial bailout. Another rejoinder might be that the automakers’ plight is of a much more longstanding vintage than that of the finance barons, though I suspect, as we learn more, we’ll be revisiting those assumptions. And even after getting substantial government aid, I think Wagoner’s the first auto industry CEO to get the boot. So perhaps we should be asking why it is that something like this hasn’t happened sooner.

All that said, though, after that meeting of the major bank CEOs at the White House last week, it’s hard for me not to think that, for all that has happened, their clout in Washington is just on a scale where they are accepted as peers of the realm. And simply immune to certain sorts of treatment.

What is good for General Motors….