Friday, August 06, 2010

The Auto Rescue is Working

Barack Obama's intervention may have saved the U.S. auto industry, but he still can't get any love. Over at the Guardian's Comment is free America, I take a look at why some have trouble admitting that the rescue worked:
Billionaire publisher and erstwhile presidential candidate Steve Forbes refuses to praise Obama for his intervention and gives all the credit to GM's chief executive officer, Ed Whitacre, for having "shaken the company up and down the assembly line and in management suites".

This is precisely the kind of leadership Obama demanded in return for federal support. Back in March last year, Obama and his advisers forced Whitacre's predecessor, Rick Wagoner, to resign because they thought him insufficiently committed to making the tough changes needed to reshape the company to survive in leaner times.
Obama insisted on tough restructuring as a condition for federal aid:
In order to qualify for continuing support, GM and Chrysler were forced to submit plans that lowered their break-even point to a realistic level. The firms first presented plans based on annualised US sales of 16m, and then cut that figure to 11.5-12m units. At the government's insistence, the automakers pared their payrolls and production capacity to survive in a market of 10m units, which made all the difference. If GM and Chrysler had been allowed to muddle through with a larger cost base, they would still be struggling, and Obama would be facing the nightmare scenario of having poured billions into companies that would yet be showing no sign of breaking even.
As for the rescue's detractors:
I can't help thinking that the critics of the auto rescue would prefer a corpse of an industry that remained pure to their ideal image of free enterprise to one that has to live with the indignity of surviving with government help.

2 Comments:

Anonymous kavips said...

Any non partisan American is slowly learning that government intervention in business appears to be good, and that those people who decry it, appear to be bad, very bad for our economic health.

5:16 AM, August 07, 2010  
Anonymous John Kossik said...

The Auto Bailout may be working but in order to secure the longterm health of our industrial base symbolized by the condition of the Detroit Metro Area we must attack the sources of this decline. These are complicated and thus tedious to find and fix but without doing so we are doomed to failure. See my recent article in the Guardian's Comment is free America entitled Detroit: no oasis in the desert.

2:31 PM, August 10, 2010  

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