The Wall Street Journal ran two articles concerning effects of the government's bear hug on GM, after the latter unwisely requested federal 'help' last year.
Yesterday, the Journal noted that Kent Kresa, GM's interim chairman, was ordered by Treasury officials to hire search firm Spencer Stuart to find new board members. Kresa had planned to search for new board members on his own, using his considerable contacts from a career as CEO of a major company.
No dice. The T-men said hire Spencer Stuart, and that is what Kresa did.
Yet, at present, the federal government owns now GM common equity. Is this thuggery, or what?
As bad as this is, it may not be the worst outcome so far from the unholy alliance of the failed auto maker and our federal government.
Dennis Berman writes in today's edition of the Journal of the stealth takeover of GMAC, GM's former financing unit, by the feds. It's one of Berman's better pieces.
First, he notes the inherent unfairness and anti-competitiveness of allowing the government to subsidize GMAC in its operations, while Ford's credit arm has no such advantage.
Just as in banking and insurance, and, perhaps, soon in health insurance, the federal government is wading into our various private business sectors, choosing winners, and backing them with free, printed money, or extremely low-cost federally-provided funding.
Berman tracks the funding going into GMAC from the federal government, as well as the FDIC's reservations and, ultimately, refusal to consider the at-shotgun-point-created "bank" that GMAC now is for emergency funding relief. One Fed governor also declined to approve the recent chartering of GMAC as a bank, opining that the granting of a bank charter wasn't meant to be used to facilitate corporate rescues.
Berman concludes with this passage,
"Put it together and what have you got? A bank potentially owned and regulated by the government. One that is embarking on an ambitious merger in a troubled industry, directed by a board in flux. Looming above are a Congress and White House that have expressed little public care for strategy or accountability.
Congratulations, indeed, taxpayers."
I'll provide my own ending thoughts, to follow on Berman's excellent digest of the GMAC situation.
The government owns a big chunk of Chrysler. It will doubtless end up owning a big chunk of failed GM, too.
We all know of the Democrat's appetite to wave a magic wand and make everything related to energy "green."
Add to the two failed US car companies in government hands a government-owned, former auto-finance company, and you have the pieces with which to mandate and subsidize green autos.
Look for Congress and the administration to mandate/coerce Chrysler and GM to produce 'green' cars and trucks, plus other 'personal' vehicles, for which subsidized financing will be offered from GMAC, the government's wholly-owned little bank.
Ford and the non-US based auto makers with production facilities onshore will be competitively disadvantaged, of course.
Perhaps the best hope here is for Ford, Toyota, Daimler and the other auto makers producing vehicles in the US to sue the federal government under the Sherman anti-trust law.
Otherwise, I'm very much afraid we are going to see a completely non-transparent, uneconomic, wasteful effort by the current Congress and administration to produce and 'sell' and finance vehicles built with their pet, though inefficient and unproven green technologies, in unfair competition with privately-financed, publicly-owned auto makers, with no way to stop them.
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