Rick Wagoner wasn’t going to get the job done turning GM (GM) around. Given the legacy constraints facing the company, we doubt that anyone would’ve done much better over the last few years.
That being said, it’s still unusual that The White House demanded the CEO of a private company be fried, rather than just let the company go down in flames, as it would if it were left to its own devices.
Politico queried a number of experts, including Columbia econ prof Charles Calomiris, who argues that Wagoner’s execution was evidence that the White House is owned by the unions:
We never should have tried to stop the bankruptcy process, which is the only path toward dealing with reality for these companies. We have a competitive, successful US automobile industry; it just doesn’t happen to be unionized, or owned by the “big three,” and it isn’t based in Detroit. If the current Administration weren’t a captive of the union bosses, and if Detroit, Ohio, and Indiana weren’t important swing states, none of this nonsense would be happening. Of course, as my uncle used to say, “If my grandmother had a mustache, she would have been my grandfather.” In other words, politics, not economics, guides the Administration’s wasteful pandering to Detroit; that obvious fact also means that the problem is unfixable by the application of irrelvant economic logic. Ultimately, of course, economics will matter in forcing a rational solution, but that may require another decade of waste, decay and economic ruin in the rust belt. Will the voters of these states ever wake up?
See, it’s not so much that Wagoner was an enemy of organised labour, but as we’ve said from the beginning, a bailout of GM — or even a highly structured bankruptcy of it — is essentially a bailout of the union.
Shareholders have been whacked. Management has been taken out. The board will be replace and bondholders of various classes will take a major bowl cut. But will the UAW end up taking a sizable hit? Probably not. If anything, knocking the UAW is the last of the White House’s priorities here, after making sure that every other party takes its lumps.