Monday, November 02, 2009

Washington, Under the Hood    [Henry Payne]

Detroit — When Washington bailed out General Motors and Chrysler, the Obama administration promised that government’s role would be to make loans to ensure that the companies became viable, profitable entities again. That promise was as believable as the idea that Washington can provide universal health care and cut federal spending — and sure enough, Washington pols have been eager to play auto mechanic.

A few examples:

Greenback mandates. While D.C. pols insist on the one hand that Detroit build the green cars politicians want, federal pay caps are making it difficult for the automakers to keep key green-friendly executives. Case in point: the ultra-green, electric Chevy Volt program has lost two top execs in the last two months. Last week, Frank Weber, the German-born engineer in charge of the Volt, moved back to his mother country to work for Opel. Just a month before, Bob Kruse, executive director of engineering for all GM plug-ins, left for the consulting industry.

"You can’t blame the guy," industry analyst Joe Phillippi of Auto Trends said of Kruse. "What is the prospect of ever making serious money . . . working for a ward of the government, where your pay is capped?"

NIMBY contracts. Numerous pols are insisting that automakers provide pork for their districts. For example, the Wall Street Journal reports that Montana’s delegation is pressuring GM to reinstate a contract with a Montana palladium mine (palladium is used in catalytic converters) that had been nullified in bankruptcy court. "The simple fact is, when GM took federal dollars, they lost some of their autonomy," says GOP Rep. Denny Rehberg.

The Dealer Untouchables. One of GM’s key moves has been to streamline its bloated dealer network to bring it in line with sales (despite a market share similar to Toyota’s, GM has five times as many dealers). But GM’s plan to eliminate 1,300 dealerships has run into a buzzsaw of Congressional opposition. Strong-arming from senators like West Virginia’s Jay Rockefeller and New York’s Chuck Schumer have already reversed the closing of 70 dealers . . . and counting.

Union favoritism. Chrysler and GM have moved aggressively to cut their transportation costs, effecting Teamster jobs and riling the union’s political friends. Chrysler, for example, will save 25 percent of its $111 million annual hauling budget by transferring to lower-cost carriers. But Michigan reps from both sides of the aisle are unimpressed, reports the Detroit News. "Relatively minor short-term cost savings generated by shifting this work to non-unionized companies is greatly outweighed by the elimination of good-paying, union middle-class jobs,” complains Michigan Republican Thaddeus McCotter.

In response to such interference, GM head of global purchasing Robert Socia responds, "The best way to repay taxpayers is to run the business as efficiently and cost-effectively as possible."

But as the auto bailouts are proving, politics — not taxpayers — are Washington’s top priority.


EDITOR’S NOTE: This item has been amended since its initial posting.

11/02 06:00 AMShare