GM Human Resources: Obama Style

Tell me, when was the last time an executive for a private firm, someone not accused of any wrongdoing or convicted of any crime, was forced out of their position by the US government? That is what happened over the weekend at General Motors. Rick Wagoner was forced out by the Obama Administration. By all accounts, Wagoner is a well-respected, hard-working sort who has been working to set a new course for the company. The GM Board of Directors had given him their full confidence and they had gone along with some rather radical changes he made in a company where labor has long had an adversarial relationship with management. Now he is out and the signature on his pink slip is Barack Obama's.

True, Wagoner is not the first CEO to lose his job after taking part in a government bailout. The CEOs of mortgage giants Fannie Mae and Freddie Mac were forced out after the government took over the companies in the fall. Robert Willumstad, the former CEO of American International Group Inc., left the company in September. Still, this is different. The government took over Fannie and Freddie and they own 80% of AIG. This is different. GM is still a private company, it is not government-owned, and yet it is the government that has pushed Wagoner out of his job.

The Power of Bailout Money

The Administration's reasoning for the move to oust Wagoner is that it was part of their efforts to save the company. You can read that as it being a condition for GM to get more bailout money to avoid a threatened bankruptcy. In other words, “Get rid of Wagoner and have more money; or we will force your company into a bankruptcy that you don't want.” Somehow I doubt the message was quite that bald and threatening, but this president does come out of Chicago politics so anything is possible. What I don't doubt is that this move is yet another act in the ongoing Bailout Kabuki Theater being played out in Washington. True, it plays to anti-executive, populist sentiments, but it is not likely to change the way the company does business.

According to David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., Wagoner's departure isn't going to change much at GM because his replacement, Fritz Henderson, the company's vice chairman and chief operating officer, had always been the heir-apparent in the company's succession plans. "I think the course that they're on, they're on," he said.

So, if the move is unlikely to produce much in the way of a change of direction in GM, what was the point of the exercise? To pressure the company into moving faster with its reforms? It can move as fast as its primary negotiating partner, the UAW, is willing to move. The union has to agree to the changes being made if they affect the rank and file, and getting that agreement is by no means certain. The Administration, which is vocally pro-union, knows that well enough. No, the point is to make more money for the automaker politically palatable for the taxpayers.

Spending Other People's Money Means Keeping Other People Happy

The government, as well all know well enough, doesn't have any money of its own. It is a conduit through which our tax dollars flow for the good of the nation as a whole. They spend other people's money. Problems, however, arise when these “other people” get tired of the way government is spending their money. In the last sixty days, the federal government has spent more money than ever before in a stated attempt to stimulate the economy and preserve businesses considered too big to fail on the theory that failing to do so would destroy the fabric of the economy and send us spiraling toward some cartoonishly apocalyptic fiscal disaster. The problem is that fewer and fewer Americans are buying the story. Obama, ever vigilant to subtle shifts of support, knew that he had to gin-up his numbers and so he threw Wagoner under the bus. Now he can say that he is being tough with these executives when he rolls out his rescue plans for the auto industry.

According to the Associated Press, senior administration officials said GM will get enough government aid to restructure over the next 60 days, while Chrysler will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA. If Chrysler fails to reach a deal with Fiat or another partner, the government won't provide any further financing, likely sending the company into liquidation.

The Bottom Line

American culture is based on the idea that the public and private spheres remain separate and we know from experience what happens when these two areas of life are mixed. The history of intrusive government makes two things very clear: If they can have one person removed, they can have anyone removed, and just because they start with the automakers, that doesn't mean they will stop there. We know what they did, and we know why they said they did it. We also know that Treasury and the Administration are still seeking broad powers over companies that have not taken taxpayer money. This kind of intrusion into the private sector is justified as protection for the economy, but there is no evidence that further government intrusion will be of any help at all. In fact, all these bailouts have been such a failure that socialists around the world are warning this Administration to stop before it is too late.

Neither Obama nor the Congress, however, are in any mood to stop their spending spree as it helps to push their domestic agenda and it gives the government more and more power over private industry. They exercised that power over the weekend, a fact that should give every business owner, entrepreneur and executive a moment of pause. The message is clear: If we don't like what you are doing with your company, we can put you out.

I can hear it now: You are saying that you are not the owner of a big multinational, you have a small business. Sure, if you are small enough then you likely have little to worry about, but that does not hold for all small businesses. The fact is that whether your business is large or small, you can be affected. Some small businesses are fairly sizable, or publicly traded, and most have relationships with larger companies that could be harmed if the government decides to make changes with them. Now is the time to contact your representatives and senators and to stop this government intrusion before it reaches down to affect your business.