Government forcing GM board out?

Earlier this week, Barack Obama said that he was sure that the federal government wouldn’t run GM, but two news stories make that statement look, well, expired indeed.  The Washington Post reports on a more substantial intervention at GM that portends a galloping shift towards corporatism:

The Obama administration will play a key role in reshaping General Motors’ board of directors over the next six months, potentially giving it even greater control in the management of the storied American manufacturer.

The president’s auto task force plans to consult with the company as it replaces a majority of its board, a White House official said. The board today largely consists of the current and former chiefs of major U.S. corporations such as Coca-Cola, Ernst & Young, Pfizer and Eastman Kodak. It is not known which of the 12 board members will leave.

The president said Monday that “the United States government has no interest in running GM.” But in practice it is already exerting tremendous influence over it, a situation that has triggered fierce debate over how much power the government should wield over the companies that it aids.

Kent Kresa, 71, GM’s new chairman, said yesterday that company officials will seek to replace a majority on the board by August, as the automaker moves to restructure operations.

And in what looks like an April Fool’s joke at Car & Driver, NASCAR fans may find their options more limited, thanks to a presidential intervention that will force both GM and Chrysler out of competition.  It’s too costly to have Government Motors involved in a sport that attracts millions of fans, you see:

In a move sure to spark outrage, the White House announced today that GM and Chrysler must cease participation in NASCAR at the end of the 2009 season if they hope to receive any additional financial aid from the government. Companies around the globe—Honda and Audi, to name two—have drawn down racing operations, and NASCAR itself has already felt the pinch in the form of reduced team spending. A complete withdrawal from America’s premier racing series is expected to save more than $250 million between GM and Chrysler, a substantial amount considering the drastic measures being implemented elsewhere.

“Automakers used to operate on the principle of ‘win on Sunday, sell on Monday,’ but the Auto Task Force’s research just doesn’t validate that as true,” said the statement from President Obama. While fans have decried the Car of Tomorrow for heavily limiting what little personalization the cookie-cutter series had previously allowed to participating manufacturers, and drivers have slammed its brick-like aerodynamics and unpredictable handling, even the governmental oversight committee sees that the full-scale regulation of the cars leaves the manufacturers very little space for research and development. “NASCAR is a racing series that regulates down to the smallest detail of the cars, where a car badged a Chevrolet or Dodge differs only marginally from a Ford or a Toyota. There’s no technological development to speak of.”

The statement goes on further to say the same demand will be made of Ford if it asks for government assistance. “In order to receive this money, corporations must demonstrate they will spend it wisely. Racing has been said to improve on-road technology, but frankly, NASCAR almost flaunts its standing among the lowest-tech forms of motorsport. NASCAR is not proven to drive advancements that transfer from the racetrack to the road, and this nation’s way forward does not hinge on decades-old technology. We need new, and we need innovation.”

To be honest, I’m not sure whether this is an April Fool’s joke by Car & Driver or not.  It certainly sounds like one, but then again, so did the notion that the President could fire GM’s CEO.  I’ve looked around for a news report independent of C&D and have yet to find one.

Let’s just say for the moment that this is on the level, as hard as that is to imagine.  It may not be a bad business move, for some of the reasons C&D mentions.  NASCAR costs a lot of money, and the tightly regulated environment doesn’t make for great R&D.  However, NASCAR is really a form of advertising, not research.  Does this mean that Obama will start approving and rejecting other forms of advertising?  Will TV ads be deemed too expensive?  No more Super Bowl spots for GM and Chrysler?

Yeah, it’s probably a gag, but in fact Obama could make that demand and get it.  Think AIG bonus outrage … and imagine what will happen when a similar amount of taxpayer money gets spent on NASCAR.

Back to the board reshuffle.  Kresa was the man who fired Rick Wagoner as CEO without checking with the rest of the board.  It’s pretty clear that the other members have more or less become window dressing.  Kresa stopped taking direction from them and has been obedient to his new master in the Oval Office.  With that made clear this week, how much will replacing the board change things at GM?

Again, one can make perfectly good business arguments for replacing the board, just as with a decision to pull out of NASCAR.  The current board hasn’t succeeded in turning around GM.  Replacing them will bring in fresh voices and fresh perspectives.  But the impetus for those moves should be from the company’s stockholders, not from the federal government — because the federal government should not have taken a stake in a private company in the first place.

How many CEOs will wind up on this board?  How many labor activists will take the place of the current board members?  I’d say less of the former and more of the latter.

Welcome to Government Motors.

Update: I’ve edited this post after noting that neither NASCAR.com nor ESPN have reports on the supposed Obama order.  It looks like a joke by C&D, and my initial skepticism was correct..

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