Jun 8, 2009

Will GM, Chrysler Remixes Succeed?

A new Chrysler is expected to emerge from bankruptcy momentarily to be followed by a rejuvenated General Motors, if the Obama administration’s wishes are fulfilled. But Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, isn’t so sanguine about the two companies’ chances of long-term success.

“The future success of General Motors and Chrysler ultimately depends on whether they can profitably design and build cars that Americans and other consumers actually want to buy,” he said in a statement. “Our biggest concern with the restructuring plan… is the potential for governments and unions to influence production, product, workforce and management decisions in ways that could jeopardize the automakers’ chances for survival, put politics and special interests above sound business strategy, and disrupt our nation’s trading relationships across the world.”

While the Obama administration has pledged to stay hands-off from management of the two companies, Donohue suggests that this will be difficult in practice, and he cites an instance where government interference in management has already taken place.

“For example, the UAW has said that it pressured GM to change where the company plans to produce a new line of smaller cars,” he said. “And as part of the GM restructuring, the administration has reportedly closed the U.S. market to Opel and blocked Opel’s forays into China so it could not compete with GM­ -- clear examples of market manipulation and protectionism. If members of Congress, along with government officials from the United States to Germany to Canada, are allowed undue influence over management’s decisions, then you can write this down: These companies will not return to profitability, and their survival will be seriously challenged. The global talent that exists in the automotive sector must be allowed to do its job and be paid on a competitive basis. Management must be permitted to make tough decisions in a competitive global market without political interference.”