Public policy, corporate roles could blur in GM reorganization

WASHINGTON As majority stakeholder in General Motors, the government is straddling two responsibilit
Sandusky Register Staff
May 24, 2010

WASHINGTON

As majority stakeholder in General Motors, the government is straddling two responsibilities that could be awkwardly at odds: corporate ownership and public policy making.

With a $50 billion investment in the once-dominant automaker, the administration's objective is to return the company to profitability and recoup as much of the bailout as possible.

But President Barack Obama also has a broad policy agenda that includes creating jobs and a greener economy, goals that may conflict with the corporate bottom line.

What if scaling back production of a fuel-efficient car at a time of low gas prices would save GM money? What if it were cheaper to close a plant and send certain manufacturing jobs overseas?

Administration officials say that they intend to maintain a virtual firewall between its policy initiatives and Obama's task force that has been working with GM and Chrysler to restructure.

''It was made very clear to us that an exercise in which we try to accomplish multiple policy objectives simultaneously was fraught with peril and would very substantially reduce the chance of success,'' said Steven Rattner, one of the top advisers on the auto task force.

The administration has already walked that high wire. Two months ago, in rejecting Chrysler's and GM's initial restructuring plans, it said GM's underperforming dealers were a drag on the company and that its plug-in Chevrolet Volt was too expensive.

GM itself weighed its corporate needs against public policy needs after the United Autoworkers and members of Congress urged it to abandon plans to build a small, fuel efficient car in China. GM now says it will build the car in a U.S. plant that was going to be idled.

Rattner said GM decided to build the car in the United States rather than China after negotiations with the UAW made the project economically worthwhile. But it probably didn't hurt to make that small nod to domestic manufacturing at a time when the auto industry is swallowing thousands of job losses.

''Clearly they have several goals,'' said Marina Whitman, a business professor at the University of Michigan and a former executive and economist at GM. ''They want GM to be viable and profitable. They want it to have a greener mix of cars than they are making now. And they are inevitably sensitive to the arguments of the Congress that, by golly, there are $50 billion of the taxpayers' money (in GM) they shouldn't be subsidizing jobs somewhere else.''

The president and members of his auto task force have insisted that operating decisions will be left to GM's management and that the administration will exercise its ownership rights only on fundamental decisions such as the selection of a board of directors and on any potential acquisition or merger.

But though none of the directors would be government employees, the government will have a hand in their selection. That opens the door to questions about the directors' loyalties.

What's more, even if Obama doesn't want to intervene in management decisions, Congress has shown that it will use its legislative powers to inject the government into issues such as executive compensation.

As if to underscore the role Congress could play, Troy Clarke, president of GM's North American operations, and Jim Press, Chrysler's vice chairman and president, were on Capitol Hill Tuesday meeting with senators in advance of a Wednesday hearing on the closure of auto dealerships. Car dealers are often prominent employers in their communities with significant political clout.

Under the GM and Chrysler restructuring plans approved by the administration, thousands of dealerships have been singled out for closure.

Lawmakers say they do not intend to micromanage, but reserve the right to question corporate managers.

Sen. Byron Dorgan, D-N.D., noted that GM and Chrysler took different tacks in reducing dealerships. GM informed some dealers that their franchise agreements would end in late 2010 while Chrysler gave some dealers only a three-week notice.

''I don't think members of Congress are trying to work through an administration to get some sort of result from the car companies,'' Dorgan said. But, he added, it was perfectly reasonable for lawmakers to ask Chrysler: ''Are you sure you're making the right decision in the way you treat these kinds of dealers in certain rural areas?''

Sen. Bob Corker, R-Tenn., said the administration faces an uphill fight if it wants to stay out of management decisions.

''There is no way to take politics out of it,'' he said. ''What we can hope for is that it's minimal at best.''

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AP writer Ken Thomas contributed to this report.