Tire Law

I applaud the government intervention to save the U.S. auto industry. Compared to the money that was spent on saving Wallstreet, this effort to preserve the heart of the American industrial power and American Union jobs, is the good fight. Yet, one thing that cannot get lost in this shuffle to remake the auto industry is the progress that has been made on auto safety. Cars are safer than they were a generation ago. But just because the government is the principal shareholder in GM, meaning “we” are the principal shareholder in GM, doesn’t mean that the commitment to making cars safer should be a lower priority.

If you make a product, you must make it safe. If you don’t the tort law should hold you accountable for that failure. If the failure is outrageous, then you should also be punished.

I do not believe that the Federal Government being shareholders in a company means it can’t be run as efficiently. But the only way to make any company truly profitable is to makes its products better, which means safer, too.

Attorney Gordon Johnson
http://tbilaw.com
http://fishtail.tv

Date: 7/15/2009 4:01 PM

KEN THOMAS,Associated Press Writers
STEPHEN MANNING,Associated Press Writers


WASHINGTON (AP) — When it brokered the restructuring of Chrysler and General Motors, President Barack Obama’s auto task force repeatedly pledged that it would steer clear of running a car company.

But with both companies exiting bankruptcy with the federal government as a major shareholder, that promise will be put to the test as the task force shifts roles from negotiator to owner.

The government could face a number of pitfalls: It could be tempted to insert itself into the day-to-day operations or sway management if auto sales continue to slide and carmakers’ financial woes continue. Lawmakers may try to use the government’s ownership as a way to push their own interests, such as making more fuel efficient cars. And the administration will need to sell its stake as quickly as possible.

“I take them at their word that they don’t want to run an auto company, the question is whether they will get dragged into it,” said Martin Zimmerman, a University of Michigan business professor who studies the auto industry. “There is a significant chance that will happen.”

Appointed by Obama in February, the task force includes representatives of cabinet members and economic advisers. It is officially headed by Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council. But much of the work was overseen by two senior advisers, Steven Rattner and Ron Bloom. Rattner stepped down last week, leaving Bloom as the leader.

Wielding power in public companies once thought unimaginable, the government panel’s efforts laid the groundwork for quick bankruptcies that helped Chrysler and GM emerge with smaller debt loads, reduced work forces and streamlined brands and dealer networks.

In the process, roughly $65 billion in government loans and aid was sunk into the two companies. Under the restructuring plans, the government now owns about 8 percent of Chrysler and 61 percent of GM.

Rattner stressed again last week that the task force plans to take a hands-off approach, saying that it wasn’t interested in “picking colors of cars.” But he noted that with such a large financial interest, the government would take a role similar to a large institutional investor.

“We have fiduciary responsibilities to the taxpayers to ensure that investment is well looked after. We will interact with GM, its management and board,” Rattner said.

Both companies face a brutal car market and numerous competitors seeking buyers in a depleted market. Auto companies are on pace to sell about 9.7 million vehicles in the U.S. this year compared with sales of more than 16 million vehicles in 2007. If the bleak conditions persist, it could increase pressure on the government to play a more active role.

Some supporters of the auto industry expect the task force to maintain its arms-length distance, crediting it with giving the two companies new life without inserting itself too much into the way Chrysler and GM conduct their business.

“They have the job to improve the foundations for restructuring without making decisions that require expertise about how you make a car,” said Rep. Sander Levin, D-Mich. “That’s the difference. How you manage is different than how you make a car.”

But critics worry that the task force has wielded too much influence and may do so again.

The plight of hundreds of shuttered auto dealers offers a window into the pressures the administration could face. GM and Chrysler are closing nearly 3,000 dealerships, moves supported by the administration. Key lawmakers including House Majority Leader Steny Hoyer, D-Md., oppose the action, saying it evades state franchise laws and will lead to the loss of tens of thousands of jobs.

“This whole notion is that some brainiac down at the task force came up with the idea that Toyota sells a lot of cars and they have less dealers and therefore we should make GM and Chrysler look like Toyota. It’s stupid,” said Rep. Steven LaTourette, R-Ohio.

The White House said Wednesday it opposed the attempts to restore the GM and Chrysler franchise agreements.

Gerald Meyers, former chairman of American Motors Corp., said the temptation to meddle with the type of cars the companies make, where factories are located, and who runs the automakers, may be too great for the Obama administration and Congress to resist.

“It isn’t in the DNA of the government to stay out,” he said.

For example, House Republicans have questioned GM CEO Fritz Henderson about the company’s decision to maintain a parts distribution center in the district of Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank had urged Henderson to keep the facility open. And the administration’s firing of GM CEO Rick Wagoner also looms large.

Administration officials said they want to dispose of the government’s ownership interests as soon as practicable. While the U.S. stake is much smaller in Chrysler — the company is now aligned with Italian automaker Fiat — there will be intense scrutiny on the government’s share of GM.

GM is expected to conduct in initial public offering in 2010 and its shares would need to grow in value for the government to break-even or make money.

“We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,” Rattner said before his departure. “We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.”

The Congressional Budget Office has provided a pessimistic outlook for a full refund, estimating last month that only about $15 billion of the initial $55 billion to GM, Chrysler, its financing arms and suppliers would be repaid. The analysis did not include the $30 billion GM received to help it navigate bankruptcy.

Also unclear is how long the task force will continue to exist. Some lawmakers, such as Rep. Gary Peters, D-Mich., want it to tackle lingering problems of other segments of the auto sector, such as extending loans to auto parts suppliers that are struggling as GM and Chrysler cut back.

Rattner said that the task force will “inevitably get smaller” as it shifts to monitoring the federal government’s investment in Chrysler and GM.

Bloom was an adviser for the United Steelworkers union before coming to Washington, helping guide it through a similar restructuring of the steel industry. His former boss, union vice president Tom Conway, said he has a firm grasp of manufacturing issues. But he wondered how long Bloom would stay with the task force, especially n ow that most of the difficult negotiating is over.

“You get this thing done and signed off on, you get a new management team in there and you move on,” he said of restructuring deals.

Copyright 2009 The Associated Press.