Posted by
Andrews on Thursday, April 02, 2009 1:40:28 PM
Now that Obama has fired the CEO of GM, mandated the automakers accepting government money provide "green" vehicles and otherwise shown the government is going to determine the direction of the auto industry in the US for the foreseeable future, I suppose there is no point in maintaining the fiction that this is a "public-private partnership". This is really nothing short of de facto nationalization of those automakers foolish enough to accept bailout funds. Of course Ford may not dodge the bullet. As the banks are finding out even refusing to accept money may not spare you, as the government apparently has the authority to force you to take funds, whether you need, or want, them or not.
However, though I am sure there are countless fist-bumps and kudos behind closed doors at restructuring the face of American capitalism, there is one small impediment to the government's takeover. Unlike other nationalized industries, say the USPS or Amtrak, there is still a free market in autos, at least overseas. Unless the government is going to mandate some sort of "buy American" plan, or impose punitive tariffs to exclude foreign makers, the cars Detroit turns out still must lure buyers away from foreign manufacturers.
And if there is one thing we have learned, it is that government run industries do that very poorly.
So, though Obama may be quite happy about his takeover, I see storm clouds on the horizon. As green cars pile up on lots, finding no buyers, and as the auto industry starts round after round of layoffs due to poor sales of government designed vehicles, Obama may come to regret this decision. Especially as the unions, usually stalwart Democrats, come to blame government mismanagement for their shrinking job opportunities and dwindling dues. When that happens, expect to see congress, especially those congressmen from strongly union districts, begin to demand Obama loosen his grip on the auto industry and restore the autonomy he was so happy to destroy.
Then again, by that time there may be nothing left to save. What investors would risk sinking money in an auto maker that could be nationalized again at a moment's notice? What executive would work at the pleasure of the president? Especially with the lessons of GM and AIG staring him in the face. In the end this may be akin to Carter's closing of nuclear waste reprocessing plants. Even though it is no longer illegal, no private firm will touch it, as the risk of future politicized closure is all too obvious.
And the same may be true of American car makers after Obama is done. Even if congress and unions eventually press for private control, Obama may be unable to find any private individuals willing to play along.
In short, we may have seen the end of the auto industry, at least for the near future.