Let GM Run GM

President Barack Obama's administration has set forth sound principles for handling the government's ownership in General Motors Corp. But pressures have already been exerted to have the government intervene in the operations of GM. There must be strong policies to limit political interference in the automaker.

One of the administration's announced principles is that the government will manage its "ownership stake in a hands-off, commercial manner. The government will not interfere with or exert control of day-to-day company operations."

But efforts to exert such control have already begun. For example, as part of its restructuring process, GM is closing or idling 17 plants, including seven in Michigan. One of the plants to be closed is the Willow Run Transmission plant in Ypsilanti. On the same day that GM filed for bankruptcy protection, U.S. Rep. John Dingell, D-Mich., distributed a letter he addressed to GM CEO Fritz Henderson asking for an explanation of why GM chose the Willow Run plant to close.

Dingell has long been a zealous guardian of Michigan's auto firms and autoworkers and is only doing what comes naturally to him. But now that the government owns 60 percent of the equity in GM, can the administration deal effectively with demands by members of Congress for special consideration for plants in their home states?

The same pressures will be brought on dealership closures.

GM is reducing its dealership network to 4,100 from 6,100. Auto dealers are powerful constituents and have a lot of political clout. Not surprisingly, the Senate Commerce Committee scheduled a hearing Wednesday on dealership closings at GM and Chrysler Corp. The dealership closings also present an opportunity for congressional meddling.

Nor will pressure be limited to Congress.

UAW President Ron Gettelfinger told a PBS economic correspondent on May 28 that the union "quite frankly, put pressure on the White House, the (auto) task force, the corporation" to have GM agree to drop a plan to import smaller cars from China and other foreign countries.

Such a move, given foreign wage rates, could have allowed GM to save a lot of money in meeting the government's mandate for smaller, more fuel-efficient cars. The company has had great difficulty in making such cars profitably in the United States.

The UAW agreed to concessions prior to GM's bankruptcy, but bargaining on a new contract would take place in 2010 — as the nation is undergoing a mid-term congressional election.

If the government still has a 60 percent stake in GM, the bargaining process would present another large temptation for political interference by members of Congress and other politicians.

All of these possibilities make it very important that the administration come up with strict and verifiable rules for building a firewall between GM and politics.

REPRINTED FROM THE DETROIT PRESS.

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