Uncle Sam as GM'S CEO: Not a Good Thing

Magee: Government Meddling Only Leads to a Smaller and Less Robust

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David Magee
David Magee
When the U.S. government forced General Motors Chairman-CEO Rick Wagoner from his job last week, headlines read that company president Fritz Henderson was taking charge. But in reality, Mr. Henderson only assumed a new title. Uncle Sam took charge of the automaker. And now the business world is watching to see what the collateral impact of such a non-capitalistic arrangement will be.

Without question, the government has played a critical role backstopping the nation's financial crisis, although many of its actions remain shrouded in heavy (and just) criticism. But when the government reaches beyond protection of the vital monetary cycle and into the daily operation of one of the world's largest manufacturing and consumer-product companies, it is time to start worrying.

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America's business environment runs upon a delicate balance of layered causes and effects supported by free-market principles. For years, General Motors has been questionably run, losing billions annually with a litany of problems including too many unprofitable products and out-of-control labor costs. But recession or no, business always has a way of correcting itself. Left alone, GM likely would have landed in bankruptcy, but the court, the company's leadership and its creditors would have solved the problems and, in the interim, the company and its brands would have continued to operate under one umbrella as planned.

Uncle Sam the CEO is now talking about dictating a split of the company so that all that remains of GM are its two most profitable brands, Chevrolet and Cadillac. By either selling off or closing down completely six of the company's other automotive brands, including Saturn, Pontiac, Buick and GMC, the government will decide, without the benefit of capitalistic influences, which brands might lead down a path toward a smaller and more profitable General Motors. But such action will also lead to a smaller and less robust American marketplace. Consider only that General Motors has long been a driving force of the nation's advertising industry. Once the world's largest automaker, the company dictated in its leadership role TV, newspaper, internet and sports-marketing initiatives that were followed by competitors, including Ford, Toyota and sometimes Chrysler.

ABOUT THE AUTHOR
David Magee has written three books on the global automotive business: "Turnaround: How Carlos Ghosn Rescued Nissan," "Ford Tough: Bill Ford and the Battle to Rebuild America's Automaker" and "How Toyota Became No. 1." His latest book is "Crash: The Fall of the American Automotive Industry and What It Says About America," due out in June.
Uncle Sam still plans to advertise, purportedly planning to tell customers in a new advertising campaign that it will back new-vehicle warranties the same way it backs certificates of deposits held by consumers at banks. But cars are not investment vehicles. Warranties are marketing dollars, a company's promise that it will make good on its product. Uncle Sam's backing the quality of American cars harks back to the sometimes stormy involvement of dictatorial countries with their Olympic teams and athletes. In efforts to make the nation proud, overreaching involvement has been known to completely erode the spirit of competition.

Uncle Sam might have years of experience as a banker dating back to the Great Depression, but he rarely stepped beyond that ring when tinkering with American business. Regulating the airline industry is one thing. Dictating the size of a consumer-product company and the specifics of its marketing efforts is another. Granted, GM needed help, and a lot of it. The company was in denial and out of control, and the recession merely brought those points to the forefront for all. But Uncle Sam is out of line, and the collateral implications on business might be far-reaching.

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