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Government Stake In GM Creates Complications

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Government Stake In GM Creates Complications

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Government Stake In GM Creates Complications

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STEVE INSKEEP, host:

So that's one way to approach health care. Now let's talk about the auto industry and fixing that. When President Obama announced this month that the government would own 60 percent of General Motors, he insisted the company's executives would still call the shots.

President BARACK OBAMA: When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM -not the United States government - will make that decision.

INSKEEP: If only it were that simple. In fact, in recent weeks, members of Congress have lobbied the company and the White House over everything from which dealerships to close to where to build a new car. Some people who follow the car business worry that political pressure could undermine GM's recovery. NPR's Frank Langfitt reports.

FRANK LANGFITT: Recently, GM told workers it would close a parts distribution center in Massachusetts. The facility sits in the congressional district of Barney Frank, a Democrat. Now, Frank chairs the House Committee on Financial Services, which oversees the very government money that has kept GM alive. Frank didn't want to see more of his constituents out of work in a deep recession, so he emailed the White House.

Representative BARNEY FRANK (Democrat, Massachusetts): I also called somebody at General Motors and said I think this is a bad idea. This is a bad time to do this.

LANGFITT: GM CEO Fritz Henderson met with Frank. Afterward, Henderson extended the life of the parts center for another seven months.

Senator LAMAR ALEXANDER (Republican, Tennessee): In a word, it's incestuous.

LANGFITT: That's Lamar Alexander. He's a Republican senator from Tennessee. Alexander says now that the government owns GM, politicians shouldn't pressure the company to reverse the cost-cutting moves it needs to turn a profit.

Sen. ALEXANDER: If you have 535 Congressmen and Senators - all of whom know nothing about building cars and have other larger interests in mind - telling GM and Chrysler how to design, build and sell cars, they're almost guaranteed to fail.

LANGFITT: Last week, Alexander even gave Frank a mock car czar award on the floor of the Senate.

Rep. FRANK: That's a lot of political hooey.

LANGFITT: Frank says the distribution center employs only about 80 people, and keeping it open a while longer won't break the budget. Frank also says that with the government propping up GM with $50 billion, politicians are within their rights to scrutinize decisions.

Rep. FRANK: Now what we should do is not burden them in ways that would make it impossible for them to get through in the long haul.

LANGFITT: Are you concerned about government meddling in General Motors?

Rep. FRANK: That's a very odd question. If the government hadn't, quote, "meddled," unquote, in General Motors, there would be no General Motors. I -meddle, you know, meddle is what you say when you don't like it. Involve is what you say when you do.

LANGFITT: Congress has certainly been involved in GM's plan to get rid of more than 1,000 dealers. The company says it has way too many, and they're hurting the brand. But Congressmen are lobbying to save as many as they can, and they've spent hours in hearings criticizing car executives' decisions.

Here's Democratic Congressman Bart Stupak last week.

Representative BART STUPAK (Democrat, Michigan): In my vast, rural, northern Michigan district, if a dealer closes down, it can mean a two-hour drive for us to reach the next closest dealer. This will cause added expense and hardship for my constituents.

LANGFITT: As Congress members fight to save dealers, the United Auto Workers has been lobbying to get new GM jobs.

Mr. RON GETTELFINGER (Union Auto Workers Union Leader): We, quite frankly, put pressure on the White House.

LANGFITT: That's Ron Gettelfinger. He runs the union. When GM said it wanted to build a small car in China, Gettelfinger told the White House he wanted it in the U.S. Here's how he put it on CNBC.

Mr. GETTELFINGER: If they're going to sell them here, they should build them here.

LANGFITT: But that means more money. Ordinarily, it costs $1,200 more in labor to build a car in the U.S. than in China. For a bankrupt company like GM, that's a no-brainer.

The White House says it did not weigh in on this issue, but eventually, GM did agree to build the car here. Sean McAlinden is a top auto economist. He thinks GM got the union to agree to a much lower wage in this case, so the automaker won't suffer too much.

But McAlinden worries about the impact of all this lobbying.

Mr. SEAN MCALINDEN (Auto Economist): I don't think it's time to hit the alarm bell yet that, you know, capitalism is dead. But, you know, people should keep an eye on it. Someone should be the Captain America with a shield, you know, to guard GM against political influence that might wreck their business plans.

LANGFITT: Ultimately, the best candidate for that job is Barack Obama. The president has sunk tens of billions of dollars into GM, in addition to a lot of his own political capital. He can't afford to see fellow politicians mess it up.

Frank Langfitt, NPR News, Washington.

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