Monday, March 30, 2009

Political Triage

By now, an awful lot of pundits and opinionistas have weighed in on this story:

WASHINGTON -- President Barack Obama is sending a blunt message to Detroit automakers: To survive _ and win more government help _ they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler's restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive _ and that the Obama administration will have a hands-on role in those changes.

Wow. The US government forcing a big company to change it's strategic planning, to the point of forcing the resignation of the COB? Whoda thunk?
GM has been conspicuous in its singular inability to change with the times. Not that any of the major three car companies has exactly been models of being ahead on the curve, for that matter. Car manufacturing requires enormous investments of time, money, energy and industrialization and to be flexible is nearly impossible for firms based on the old "time and motion" studies that created the Henry Ford assembly line in the first place.
The US auto industry IS a model of repetitive stress disorder, however. What the US auto industry needed to be was out front of demand, when in fact, it has always tried to browbeat people with their offerings.
Think about it: ahead of last year's major oil crunch, when oil was only just starting its five-year long upward climb (plenty of time to retool, mind you), what commercials did you see?
Did you see Chrysler/Dodge push compact cars, reminding people that oil prices are hopping and that global warming is coming? Did you see GM push their economy lines? Ford sell us hybrids?
Toyota did. Honda did. Hyundai did. Even Volkswagen did.
To make this mistake once in a lifetime is one thing, but it's not like Detroit hasn't had plenty of warning that oil prices were about to start an inexorable climb to the sky. Indeed, despite the terrible economic collapse, OPEC looks to be aiming for a $50 a barrell price in 2009. That would put us at about 2005 levels, and maybe have gasoline at $2.50 a gallon, maybe $3, by the summer.
In fact, more than thirty years ago, Detroit had the warning that oil was not going to remain the implacably cheap resource it always had been and for people who live and breathe on supply and demand, they somehow missed the fact that India and China would be driving more and using more oil, guaranteeing a permanent rise in prices.
Someone's head had to go if only for blatant incompetence, in other words, much like Jake DeSantis should have left AIG quietly last week.
Too, Obama's team probably senses that the American people, while still largely supportive of his attempts to revitalize the economy, are getting tired of "no-strings attached" reclamation projects. I can't blame Obama much for these. They really started with the Fed's bailouts last year under Bush, which sort of forced Obama to throw good money after bad this year, an allusion he made last Thursday.
So he's fired a warning shot after carefully choosing his target. He could have picked the Chrysler chairman and thrown the merger talks with Fiat out of whack. He could have chosen any banker in the mix, but that might have created massive turmoil in the credit and stock markets, and he really had no leverage at this point in that indstry anyway.
So he took the biggest, juiciest and easiest target: an incompetent boob running an incompetent company incompetently.
Good for him.