US Takeover Of GM Will Help Define Obama Presidency
10 Juli 2009 - 6:20PM
Dow Jones News
General Motors Co.'s quick emergence from bankruptcy protection
Friday gives President Barack Obama a much-needed dose of positive
news amid questions on the effectiveness of his stimulus
package.
But political analysts warn that the president's risky move to
take over the world's second-largest auto maker could come to haunt
his administration if the experiment fails.
"Like the stimulus bill, this then becomes a litmus test for
what the administration wants to do," said Julian Zelizer, a
professor of history and public affairs at Princeton University.
"If it doesn't work out, if it becomes a failure itself, then it's
not just about GM or the economy. It's part of the
administration."
Poll numbers show that Americans are increasingly wary of the
government's auto-industry bailout, underscoring the political
risks posed to Obama. Nearly seven in 10 respondents in a Wall
Street Journal/NBC News survey last month said they had concerns
about federal interventions into the economy, including Obama's
decision to take an ownership stake in GM.
The U.S. takeover of GM - the government will hold a roughly 60%
stake in the company after investing $50 billion in its
restructuring - is part of a series of bold moves that will come to
define Obama's first term. The Obama administration is also
attempting to overhaul the nation's health-care system and regulate
greenhouse-gas emissions.
With GM's rise out of bankruptcy protection, the U.S. government
for the first time owns a giant industrial company, after taking a
smaller ownership stake in Chrysler Group LLC. Obama has repeatedly
said he doesn't want to run the companies and will seek to sell the
government's stakes as soon as it appears "practicable," though his
administration acknowledges that could take years.
Obama's handling of GM has already invited Republican criticism
that he harbors a far-left, big-government agenda. But Alex
Keyssar, a professor of history and social policy at Harvard
University's John F. Kennedy School of Government, believes most
Americans view the administration's GM takeover as a matter of
necessity rather than an example of a broader agenda.
"It's an experiment that they were forced into," Keyssar said,
noting that Obama faced the prospect of two large auto makers
collapsing in his first months in office. "Anybody in office prays
that they won't have to face that kind of situation."
GM emerged from reorganization faster than expected, a
remarkable short-term achievement for the young administration.
During the process Obama came under heavy criticism from creditors,
dealers and other stakeholders who contended they were treated
unfairly. But the swiftness of GM's and Chrysler's reorganizations
could validate the administration's dealings with the
companies.
Still, final judgment of the administration's auto restructuring
will ultimately hinge on the long-term success of the auto
makers.
Clifford Winston, a senior fellow at the Brookings Institution,
a Washington think tank, warned that while the administration may
have prevented GM from a sudden collapse, the restructuring has yet
to address a central cause of the auto maker's problems.
"In terms of daily operations, nothing is fundamentally
changed," said Wintson, who has argued against a government bailout
of GM. "We truly don't understand what inside the organization
enabled the decline to go unchecked for so long. They'll point to
legacy costs. That's very recent."
He predicted that GM would continue to lose market share to
foreign rivals because the restructuring hasn't ensured that the
company will improve its products.
"I see a company still in trouble," he said.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com