Wednesday, June 10, 2009

GM Needs a Political Strategy

GM Needs a Political Strategy. By Holman W Jenkins, Jr
Whitacre is not there to sell cars.
WSJ, Jun 10, 2009

What's good for Ma Bell is good for GM.

That was our second thought on hearing that former AT&T chief Ed Whitacre would become the new GM board chairman once the company reorganized under Obamaruptcy. Our first thought was: Now Ivan Seidenberg has to get a car company.

Mr. Whitacre came up as an engineer and ran AT&T from 1990 to 2007. He'll feel right at home. Whether he liked it or not, government was his partner all the way at AT&T. The company may not have been owned by the feds, as GM now is, but government had its finger in every decision he made. Then again, politics was and ever has been integral to GM long before it turned to the government for a bailout. Succeeding for Mr. Whitacre will mean, first and foremost, making sense of GM's relationship with Washington.

Mildly laughable is the recent published insistence by Obama car czars Steve Rattner and Ron Bloom that GM would be run on a strictly commercial basis while in government hands. Would that it had ever been so.

Already federal money is clearly being used to provide a softer landing for the UAW than labor would have gotten in a bankruptcy reorganization under private investors. The bailout has also deeply politicized the company's business model by privileging its money-losing domestic operations, saddled with the UAW, over its money-making foreign ones. A truly commercial vulture investor would have done the opposite: dumped North America and kept the promising businesses in China, Russia, Europe and Latin America.

More than that, the bailout has disassembled what was finally becoming an integrated, global GM, rather than a collection of rivalrous regional interests. Australia's GM Holden Ltd. had emerged as the engineering center for GM's new rear-drive platform, underlying the rightly praised Pontiac G8 and Chevy Camaro. Now GM, under the terms of the federal bailout, won't be able to invest in its Australian affiliate until it has paid back its government loans.

But then GM has suffered from excessive political attention for most of its existence. Wonder where its famously defensive, obfuscatory "culture" comes from? This is where. The company never has been able to launch a model or close a factory without weighing the political consequences. It can't control its dealer network because dealers are a powerful interest group in every state capital. GM cannot market a car without first knowing how regulators will treat it for fuel-economy purposes, so GM can know how many it can afford to sell (if it's a big car) or how many it must sell (if it's a small one).

Most of all, GM cannot sit down with the UAW without knowing that Democratic politicians, on whom GM relies for help in Washington, will only be satisfied if the UAW (with its power over the re-election hopes of officeholders all over the upper Midwest) is satisfied.

All this means Mr. Whitacre may well be the right man for GM. What the company needs more than anything else is a political strategy. Its loss of political clout has been catastrophic, leading to (among other things) devastating new CAFE regs. But he has one big leg up on his GM predecessors: A Democratic administration now owns GM and needs it to succeed financially. The voice of reason will be heard because it's in Democrats' interest to hear it. He can surely expect, for instance, to find Team Obama amenable to a certain amount of quiet fudging of its new fuel mileage rules to keep GM's pickup and SUV profits flowing.

Make no mistake. Mr. Whitacre's task won't be selling cars (somebody else can do that) but reshaping the policy environment in which GM must operate. His model should be another Ed -- Ed Jordan, who as chief of the nationalized Conrail never received the credit he deserved for rescuing the carrier by leading the charge for regulatory reform on Capitol Hill.

His braintruster was Leo Mullin, who went on to lead Delta Air Lines, and who as a young Conrail veep built the case that Conrail would become a permanent drain on taxpayers unless the rail industry were free to design and price its services with the sole object of making a profit for investors.

Mr. Mullin later recalled for author Rush Loving Jr: "Most people would say you're kind of crazy. It's your job to run your company in the environment you have. And Jordan said, 'No, it can't be done that way.' . . . And he deserves a hell of a lot of credit for that." Without the Jordan strategy, Conrail never would have been successfully privatized after he left.

Mr. Whitacre hasn't spoken, but we suspect he's going to GM for the same reason Ed Liddy (another Ed) went to AIG or David Petraeus went to Iraq: patriotism. His job will bring lots of battles, but none more important than untangling the unholy conflict between Mr. Obama's fuel-mileage goals and his hopes for a "viable" domestic auto industry. Good luck.

No comments:

Post a Comment