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Bankrupt GM A Washington Temptation

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Bankrupt GM A Washington Temptation


Bankrupt GM A Washington Temptation

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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General Motors is entering its fourth week in bankruptcy. The government has sunk 50 billion into the company and is expected to own most of it by the end of the summer. President Barack Obama has made it clear that he doesn't want to run GM, but that doesn't stop some in Washington from trying to influence how the company does business.

NPR's Frank Langfitt covers the car industry. Hi, Frank.


STEWART: So, what are some of the decisions politicians are trying to influence?

LANGFITT: Let me give you an example. Barney Frank, the powerful chairman of the House Financial Services Committee, he recently found out GM was going to shut down an auto parts distribution center in his Massachusetts district. So he meets with GM's CEO Fritz Henderson and he convinces Henderson to keep the center open longer. Now, other politicians have already criticized Congressman Frank for meddling with GM. Lamar Alexander, he's a Republican Senator from Tennessee, he gave Frank a mock award on the floor of the Senate.


LANGFITT: He called him a car czar. Now, to give you a sense of how big this problem really is, the next week, Alexander gives himself a car czar award. And that's because, like a lot of other Tennessee officials, he's trying to persuade GM to put a new car in a plant back home. Now, I was talking to Senator Alexander about this, and here's how he explained it…

Senator LAMAR ALEXANDER (Republican, Tennessee): I did what any congressman or senator does. It's just as incestuous as what Barney Frank did. And so I gave myself the car czar award, in a way to spotlight the political meddling.

STEWART: So we have both Republicans and Democrats pressuring the executives of a company the government will essentially own?

LANGFITT: Exactly. I think the big lesson here is government ownership creates this inherent conflict for legislators. I mean, on the one hand, they should be protecting that $50 billion investment you mentioned, that the U.S. taxpayer has made to save this company. They also, you know, will make sure that GM will operate independently as a profitable business, so maybe we'll get some of that money back. On the other hand, they feel pressure from constituents to lobby for things that may not be in the best interest of GM.

STEWART: And I have to imagine it's not just politicians who are trying to put some pressure on GM these days.

LANGFITT: No, lots of people are interested. Another group, the United Auto Workers, which, by the way, will indirectly own 20 percent of the company. Now, recently, the union lobbied the White House and GM to build a small car here in the United States that the company wanted to build in China. Now, this move would be good for the union, good politics, more U.S. jobs, but, of course, it adds costs to the company. In fact, it's about $1,200 more per car in labor to build a car in the U.S. versus China.

STEWART: All right, faced with this decision, what did GM do?

LANGFITT: They buckled. They agreed to build it in the U.S. But there's more to the story. GM was pretty smart here. They won't exactly say what they did, but from everyone I've talked to, it seems like they cut a deal with the union that the union would have to take much lower wages to build this car. So it's kind of a good example of how the company is managing political pressure, but making sure it doesn't take a bath financially.

STEWART: GM and Chrysler have also taken a lot of heat over their plans to close about 2,000 dealerships. Both the Senate and the House have been holding hearings on this. What have they been like?

LANGFITT: Hours and hours, frankly, of congressmen beating up on car executives.

(Soundbite of laughter)


LANGFITT: They've been asking very detailed, pointed questions. Here's Congressman Bart Stupak, he's a Michigan Democrat questioning a Chrysler executive.

Representative BART STUPAK (Democrat, Michigan): How are people going to get service? I mean, if I bought a car this year at General Motors or at Chrysler and my dealer's closed, how do I get service on that car? Am I going to have to go somewhere else? In other words, drive two hours when my service light comes on?

LANGFITT: And, again, the conflict here is between what might be good for the company versus what might be good for constituents. The dealers are independent business people. They've sunk a lot of money into these dealerships and they want some kind of compensation. Also, the customers, they want convenience.

Now, GM and Chrysler have given some dealers reprieves. But these hearings, frankly, most people think that they are for show to let people back home know that congressmen care.

STEWART: So what are the chances that politicians could foul up GM's recovery?

LANGFITT: Well, people who follow the industry say so far there's nothing here that could cripple the company. But they also say that taxpayers and the White House really got to watch this closely.

STEWART: And so will you.


STEWART: NPR's Frank Langfitt. Thanks, Frank.

LANGFITT: Happy to do it, Alison.

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