General Motors CEO Rick Wagoner is stepping down effective immediately at the request of the White House, according to administration officials. The decision precedes a President Obama plan to restructure the auto industry which has been failing even with funding from the government. This restructuring is part of the deal for the Chrysler and GM to recieve additional loans from the federal government. They have already received close to 18 billion in loans and are now asking for 21.6 billion more. The decision to have Wagoner step down is not entirely unexpected, though it is sure to be politically controversial.
Never before have we seen the government openly dictate who can run a business before, and already the critics are saying it is yet another sign of Socialism.
While certainly the decision to take the auto industry into a different place management wise is a sound ideal, it is not the place of the government to dictate those terms as a rule. The key component here is the fact that these funds are not free. The auto companies are on the hook to pay them back as they are considered to be loans. That said, why is it any different than a bank giving you or I a loan and then telling us how we must manage it or spend it? We surely would not do business with that bank. Further, the car companies do not have the option of simply going somewhere else. Critics say that it amounts to extortion in some respects. The government knows that the auto industry must come to them, and they can get the terms they please.
The flip side of this argument is that the companies can always simply go bankrupt. Nobody thinks that is a good idea, as it would literally cripple our job situation even further than it already is. In spite of this situation, the car companies such as Chrysler and GM have little choice but to do what the government says. They know that the only chance they have is bail out from the government. The scary part is that the government knows it too.
Socialism is all about government control and regulation. This is not a situation that I would wish to handle as a United States President. If Obama just gives money to the car companies with no regulations, then he is being careless. If he gives regulations, he is a Socialist. If he lets them rise or fall on their own merit, he is essentially burying the US economy and auto transportation industry. No decision here is going to be a good decision.
With that said, it appears that Obama is just pushing for good business here. Having the leadership that buried the company in the first place eliminated is a good idea from a purely business standpoint, and so it is a starting point. President Obama will take heat regardless over this, so it appears he may as well get some things done to clean up the Auto industry while he is at it.
This news is dangerously close to Socialism, however, and President Obama needs to be careful how far he pushes that envelope. He already was being portrayed as pushing for Socialism, and this will only make it worse as it is. It remains to be seen where we go from here, and where President Obama leads us just might shape the very fabric of our economic system.
