As the saying goes, be careful what you wish for -- you just
might get it. Just ask American car makers.
In December, the CEOs of General Motors and Chrysler flew, hat
in hand, to Washington. They needed billions of taxpayer dollars to
stay out of bankruptcy court, company executives said.
Unfortunately for all of us, they got their wish. And more than
they thought they'd bargained for.
On March 30, President Obama ousted General Motor's CEO. He also
ordered Chrysler to join forces with a particular suitor (Fiat).
And he vowed to stand behind your car's warranty. Our
commander-in-chief is now our car czar, too.
GM and Chrysler have no one to blame but themselves. As the
Brits might say, once the automakers took "the Queen's shilling,"
they belonged to her army. They had no choice but to follow federal
orders. And since taxpayers now have a multi-billion dollar stake
in these companies it follows, as night follows day, that
Washington could demand changes in GM's management.
No wonder some banks are now returning federal bailout money.
They'd rather risk failure than virtually guarantee it by
having policymakers in Washington tell them who to hire and how
much to pay.
So what might a government-owned automaker look like?
"The United States of America will lead the world in building
the next generation of clean cars," Obama announced on March 30.
Yet the president's own automotive task force wrote recently that
GM's electric car -- finally approaching the streets after years of
design work and billions of dollars spent on research and
development -- remains "too expensive to be commercially successful
in the short-term."
Worse, Obama's team adds, "GM earns a large share of its profits
from high-margin trucks and SUVs, which are vulnerable to a
continuing shift in consumer preference to smaller vehicles." So it
seems the government will demand that GM manufacture compact
But -- and this is the multi-billion dollar question -- is there
really a consumer preference for smaller vehicles?
Apparently not. Edmunds.com reports that in 2008, sales of
fuel-efficient hybrids dropped 10.3 percent. Small cars are
languishing on dealer lots, The Wall Street Journal notes. That's
astounding, since throughout 2008 the price of gasoline reached
levels most Americans had never dreamed it could. Yet as soon as
gas prices tumbled, so did hybrid sales.
Meanwhile, in November GM had workers at its auto plant in Texas
-- the only one where its big SUVs are made -- working overtime to
produce the vehicles that people were actually buying. Half the
cars sold in the U.S. in December were SUVs.
Consumers are fickle. They haven't wanted enough of the cars GM
has made in recent years, so the company's market share has eroded.
There's no reason to expect Americans will be eager to buy the cars
a government committee orders it to build.
Quite the contrary, in fact. One of GM's problems has been that
it can't change its product line as quickly as its competitors can.
Honda, for example, runs a plant that can switch from making
compacts to crossover SUVs in an afternoon. It takes GM and Ford
months to switch over a line, and costs hundreds of millions of
dollars. If GM's problem today is that it's inefficient, wait until
layers of federal bureaucracy are added to the company's management
It's ironic that President Obama is now hinting that GM and
Chrysler could end up in bankruptcy court. After all, that's the
very solution some of us suggested even before the government
poured billions of tax dollars into the companies.
Americans don't need government in the business of building
cars, or telling us what type of cars we can buy. GM and Chrysler
should go into bankruptcy, reorganize and return as smaller but
healthier organizations -- and do so without any additional
taxpayer dollars. The bureaucrats in Washington have plenty of
other things to do, don't they?
Feulner is president of The Heritage
As the saying goes, be careful what you wish for -- you just might get it. Just ask American car makers.
Edwin J. Feulner, Ph.D.
Read More >>
Request an interview >>
Please complete the following form to request an interview with a Heritage expert.
Please note that all fields must be completed.
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 200,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam(R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute, with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. Read More
© 2013, The Heritage Foundation Conservative policy research since 1973