The Motor City, though still troubled by Wall Street envy, is embracing the Obama administration’s “tough love.”
Industry leaders voiced populist anger Monday over the tough treatment meted out by the White House to U.S. automakers - including the ouster of General Motor Corp.‘s chief executive - when compared with the no-strings bailouts of the nation’s financial institutions.
But for most, the emotion was tempered by a determination to make the best of a bad situation.
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“It’s not a level playing field,” said Mike Green, president of United Auto Workers Local 652. He was referring to Washington’s response to the auto industry versus its handling of the financial industry. “You didn’t see AIG have to crawl through you-know-what to get the money. They just had their hand out. Wall Street took care of their own.”
Michigan Gov. Jennifer M. Granholm, a Democrat, spoke similarly in an appearance Monday on NBC’s “Today” show and later at a town-hall meeting in suburban Detroit’s Macomb County.
“Many of us feel there is a double standard,” the governor said of the Obama administration’s refusal of requests by GM and Chrysler LLC for a combined $21.6 billion in loans because it judged that the automakers didn’t have viable plans for business success.
She said a similar level of scrutiny should be applied to Wall Street companies that have absorbed hundreds of billions of dollars in federal money dozens of times what Chrysler and GM were refused.
But through the disappointment, there was still plenty of Midwestern resolve to make good on Washington’s aid offer - which requires GM to restructure radically within the next 60 days and Chrysler to complete an alliance with Italy’s Fiat SpA in the next 30 days - as the last chance to save the industry long synonymous with the city of Detroit.
“The federal government recognizes the importance of the American automobile industry to our nation, to jobs, to our manufacturing sector and national security,” Mrs. Granholm said on NBC. “This industry has to survive if this nation is going to manufacture things. It’s the backbone of the manufacturing sector.”
Local officials, U.S. lawmakers and union leaders also warned that the stunning events of the past 24 hours - Sunday’s ouster of GM Chief Executive Officer Rick Wagoner and Monday’s announcement that GM and Chrysler must do more restructuring - meant that Washington and the Obama administration were now officially on the hook for Michigan’s economic fortunes.
“This is tough love for our favorite industry in Michigan, but it’s also a real opportunity and I’m heartened,” said Lansing Mayor Virg Bernero, whose area has been hit hard by auto factory closings and the recession. Mrs. Granholm also used the “tough love” metaphor at her town-hall meeting.
“Some here look at this as an ultimatum, but sometimes that is what I think leadership is about,” said Mr. Bernero, who has lobbied Washington with a task force of mayors who have banded together to save the industry.
But, the mayor added, “I’m not going to stand by and let the federal government do it wrong.”
Mr. Green said the president had reassured him with the federal government’s vow to back GM and Chrysler’s products and warranties and not give up on a historic industry. His members feel positive about the response, even as they know tough days are ahead, he said.
Mr. Obama “is pretty much where he was from the beginning - he’s supporting working people and the middle class and trying to give people peace of mind that if they buy a vehicle, they should not worry about the service or the warranty because it’s backed by the federal government,” the union chapter chief said.
UAW Local 602 President Brian Fredline said having a clear federal mandate and deadline will make it easier to achieve the needed changes in the U.S. industry.
“Now there is an actual plan with an actual purpose and guidance for it so I’m feeling more confident that we will get it done in 60 [days] because we know what needs to be done now,” he said.
Detroit Mayor Ken Cockrel Jr. also said his city would weather a painful reorganization. He said the president’s commitment to automakers would allow them to emerge stronger “with a minimum of jobs lost.”
“The city of Detroit will work very hard to minimize the negative impact restructuring will have on Detroit and those working in the auto industry,” he said, adding that the city will lobby Ed Montgomery, a former deputy labor secretary now acting as an administration liaison to auto-industry cities, to “seek additional resources that will help keep Detroit working.”
Sen. Carl Levin, Michigan Democrat, issued a statement emphasizing “the president’s statement that he is ‘absolutely committed’ to the United States leading the world in building the next generation of clean cars. Presidents rarely make absolute commitments. This is a very notable and very appropriate one.”
Rep. Candice S. Miller, Michigan Republican, said Monday that the Obama administration had to follow through on its responsibility to ensure that the U.S. auto industry succeeds.
“The president and the Auto Task Force have now determined that they know better how to run these complex manufacturing organizations and are going to force changes,” she said. “By implementing these changes they now become accountable for achieving success. Accountable for the jobs, accountable for the livelihoods of the families which are at stake and accountable for the survival of American manufacturing.”
Mrs. Miller called on her constituents in southeastern Michigan to “focus our frustration with this process on demanding that accountability. We have little time to force positive change so it is time once again to roll up our sleeves, put our heads down and get to work.”
However, the ouster of Mr. Wagoner showed that the Obama administration was calling the shots at GM. Several out-of-state Republicans said that justifies their long-standing opposition to bailing out Detroit.
“When did the president become an expert in strategic corporate management?” asked Rep. Tom Price of Georgia, chairman of the Republican Study Committee. “The federal government is famous for its mismanagement, yet this administration continues to demonstrate its certainty that Washington always knows best. The notion that the federal government is capable of dictating efficient business models for large global corporations is absurd.”
Sen. Bob Corker, Tennessee Republican, decried the “sweeping new power” under which “the White House will be deciding which plants will survive and which won’t,” a power that he predicted would lead to GM management responding to political rather than economic cues.
“It’s been a long time since Washington has seen the kind of kowtowing that’s about to occur among members of Congress trying to curry favor with the administration to keep plants in their states open, and it will be interesting to see if the administration makes these decisions based on a red state and blue state strategy or based on efficiency and capable, skilled workers at each plant. If they use the latter, our GM plant in Spring Hill, Tennessee, should do very well,” he said.
Mrs. Granholm and Mr. Corker were united on the removal of Mr. Wagoner. The Democratic governor said Mr. Wagoner “clearly is a sacrificial lamb” and had “to take one for the team” so GM could get aid. The Republican senator called the firing “a sideshow to distract us from the fact that the administration has no progress to announce.”
Rep. John D. Dingell lauded GM’s progress, especially the company’s ongoing contract talks with the UAW. He also urged patience from the Obama administration to let Chrysler finalize its Fiat partnership, without which it cannot get any more government loans and likely will head for bankruptcy.
“The path forward for Chrysler over the next 30 days and beyond is challenging to say the least,” the veteran Michigan Democrat said. “I urge the Obama administration to carefully review progress made by Chrysler at the end of April and give the company more time to complete its restructuring if needed. The fate of this major corporation, and the tens of thousands of workers employed by Chrysler and its suppliers, are too important to live or die by an arbitrary deadline.”
Mr. Fredline defended the union as being far ahead of the curve on concessions with GM than other stakeholders and said it is well-positioned as future deals are sought.
“We have been proactive on these concessions, so we are glad that the administration will force everybody’s hand to catch up to the UAW because right now, we’re the benchmark for saving this corporation,” the UAW local chief said. “We are already a part of the solution and not a part of the problem.”
But after all the Wall Street envy, the debate over free-market ideas, the blaming of Mr. Wagoner, and so on, has subsided, Detroit realized Monday that it now has no choice. This has to work.
Mr. Obama is “looking for everybody now to roll up their sleeves and for all of us to dig back into this,” said Mr. Green of Local 652. “People say that we can’t compete. That’s bull. We are not behind in the game, and I would tell people who are watching all this unfold: American ingenuity, never give up on it. We are worth saving.”