Has Industry Sold Its Soul for Bailout Money?
Industrial Policy: The U.S. government dictating a major corporation's merger partner and who its CEO should be was unimaginable a year ago. Has industry sold America's free-market soul for bailout money?
A president of the United States orders the chief executive officer of General Motors to resign. The same president is further ordering Chrysler to merge with Fiat, the Italian firm specializing in flimsy cardboard boxes on wheels.
This new reality should send a chill down the spines of all Americans. The federal government has begun to run U.S. companies.
President Obama said Monday, "my team will be working closely with GM to produce a better business plan."
To that confident assertion he added these stern sentiments:
"They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can't make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?"
Who is in a better position to know the answers to these questions? Rick Wagoner, the GM CEO for nine years and former GM chief financial officer who has been with the automaker since the late 1970s, even running one of its foreign affiliates in Brazil, and who holds a Harvard Business School MBA?
Or President Obama, a former community activist from the south side of Chicago with a great rhetorical gift?
The president answered that question this week by ordering Wagoner's firing.
Imagine if it were not GM, but your own small business employing a handful of people.
How would you like the country's highest-ranking elected officeholder telling you that he and "my team" know better than you about cleaning up your balance sheets and competing against your rivals? How would you like being ordered by the government to fire the person you hired as manager of your company?
Does an entity that is itself $11 trillion (and climbing) in debt have any right to criticize a private business for owing tens of billions, let alone to claim it can do better running that business?
The same arrogance was heard regarding Chrysler. The president announced that, "we've determined, after careful review, that Chrysler needs a partner to remain viable." Why was Fiat picked? Because the Italian firm "after working closely with my team, has committed to building new fuel-efficient cars and engines right here in the United States."
In other words, its politics are right.
The merger will operate under a deadline with Washington holding a gun to Chrysler's head: "We'll give Chrysler and Fiat 30 days to . . . reach a final agreement," the president said. "But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business."
It should now be clear: Federal bailout funds are a corporate narcotic. Once a company starts taking them, a chemicallike dependence develops. The addict does whatever will bring in more of the drug. Ultimately, like heroin, the short-term euphoria gives way to decreased function for the recipient, even destruction.
More importantly for the American people, letting Uncle Sam become a corporate drug dealer — with taxpayer money the addictive poison being peddled — also places Washington in a position of dictatorial control over the private sector.