Every two-bit congressman with a phone is telling GM how to run its business

Posted by Bill Dupray on Oct 30 2009 Filed under Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Ponder a few questions as you read this. Would you want to own stock in this company? Would you want to contract with this company? Would you want to buy a car from this company? These are all questions that people ask every day about companies in the free market. Unless the answer to all three of these is yes, the company will likely fail. And with Congress calling the shots, the answers are pretty clear.

From the Wall Street Journal.

Companies in hock to Washington now have the equivalent of 535 new board members — 100 U.S. senators and 435 House members.

Since the financial crisis broke, Congress has been acting like the board of USA Inc., invoking the infusion of taxpayer money to get banks to modify loans to constituents and to give more help to those in danger of foreclosure. Members have berated CEOs for their business practices and pushed for caps on executive pay. They have also pushed GM and Chrysler to reverse core decisions designed to cut costs, such as closing facilities and shuttering dealerships.

So after the government took over GM, the Car Czar decided to shutter hundreds of dealerships to save some cash. Since then, 70 dealerships, largely due to the application of congressional muscle, were reinstated.

So far, GM has given reprieves to 70 dealerships nationwide. GM’s Washington spokesman says congressional pressure helped “put a focus on an individual dealer’s plight.” Beyond that, he said, “decisions to save individual dealerships were made on the merits.”

They are meddling in contract decisions.

In addition to the dealership issue, lawmakers have jumped into a union fight that pits GM and Chrysler against two trucking companies that haul new cars around the country. The auto makers want to give some of the work to cheaper nonunion contractors. But that raised the ire of lawmakers who support the International Brotherhood of Teamsters.

Rep. Dale Kildee, a Democrat from Michigan, sent letters on Sept. 30 to the chief executives of both GM and Chrysler, demanding they explain their positions and advising them to stick with their unionized carriers. At least four other lawmakers sent similar letters.

Of course, environmentalists in Congress need to not only tell them how to build and dispose of cars, they want to revisit matters already settled in Bankruptcy Court.

Meanwhile, Sen. Sheldon Whitehouse, a Rhode Island Democrat, is spearheading a push within the Senate to get GM to rejoin an environmental program that removes mercury from cars headed to the scrap heap. GM escaped its obligations under the program through the bankruptcy process. Some lawmakers, as well as state officials, are now trying to reverse that.

And did you know some members of Congress are experts in deciding which mining companies should supply the palladium for catalytic converters?

In Montana, the fight that broke out this summer was over a mining contract to supply palladium, which GM needs to produce catalytic converters. . . .

GM for years was supplied by the Montana-based Stillwater Mining Co., which bills itself as the country’s only supplier of the precious metal. In early July, Frank McAllister, the mine’s chief executive, received news that GM, as part of its bankruptcy proceedings, planned to sever its ties with Stillwater in favor of cheaper suppliers in Russia or South Africa. . . .

The two senators — [Democrats Jon Tester and Max Baucus] — asked GM to reverse its decision.

Now, some of these decisions may be good business decisions, some may not. But that is not the point. The problem is that the motivation behind this congressional pressure on executives is political, not business. Corporations exist for one reason only: to make a profit. All decisions should be focused on the best way to sell the product and compete in the market place.

But the politicians don’t really care if GM makes a profit. They are more interested in using GM as a federal piggy bank full of goodies to be doled out to constituents. Sen. Whitehouse, the environmental guy from Rhode Island, doesn’t give a hoot if a dealership in Indiana stay open, and the Montana Senators who want Montanan palladium in the catalytic converters don’t care if the Michigan plants use union labor or not. These people are not running a business, they are running a taxpayer funded welfare office with the General Motors sign on the front of the building.

The money quote from GM sums it up perfectly.

GM’s spokesman says the company will keep an open ear. “Being responsive to members of Congress while moving forward on our business plan,” he says, “is the best way to repay the nation’s support.”

As part of their business plan, they will keep an open ear to people who don’t know how to run a business. Perfect.

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