Kyl: Government Motors

It was entirely predictable that, when the government acquired a 60-percent stake in economically-troubled General Motors, key decisions would be based less on sound business practices and more on advancing the agendas of unions and environmental groups. That is, special interests in President Obama’s political coalition.


It is not too much of an exaggeration to conclude that, over the past few decades, union demands have essentially turned GM into a company that provides health-care and pension benefits first, and makes cars second. The United Auto Workers union has already announced that wages and benefits will remain intact under the new U.S. ownership.

If the Obama administration doesn’t have the courage to say no to the unions when the company is teetering on the brink of bankruptcy, what will it say the next time union contracts are up for negotiation? You can bet that taxpayers will be on the hook again.


The company can’t even move to less expensive quarters. Predictably, President Obama has already called his friend, the Mayor of Detroit, to say: not to worry, the headquarters will stay in Detroit. This is the President who said he had no intention of running the company.


The Obama administration has also imposed a mandate on GM to produce small “green” cars, even though they are costly and not in high demand. Everyone appreciates good fuel economy, but some consumers fear that small, light cars aren’t safe enough for them and their families. Others live in climates that require heavier, four-wheel drive vehicles, while others haul equipment that requires more space. Whatever their reason, not all consumers want tiny cars.


The administration has also instructed GM to close some dealerships to save money and streamline operations, though Congress has held hearings to criticize plans for these closures and has been asked to investigate whether the administration has played politics in deciding which dealers to close.


We know from our experience with mortgage lenders Fannie Mae and Freddie Mac what happens when politicians substitute their political judgment for sound business management.


Some in Congress made clear to Fannie and Freddie that to keep their federal charters, they would have to craft their business models to serve a political purpose. As a result, Fannie and Freddie proceeded to underwrite $1 trillion in bad mortgages to satisfy government demands for “affordable housing.”


Fannie and Freddie’s practices are at the root of today’s foreclosure crisis, yet the Obama administration is about to do to GM and Chrysler what the federal government did to Fannie and Freddie. It is going to put Washington politicians in control. They shouldn’t be running corporations.


To this end, I am cosponsoring a bill in the Senate that would distribute government-owned GM and Chrysler stock to the American taxpayers who paid for it. Giving it to taxpayers is the only way to remove special interest politics from the car companies’ management.


With the free market at work, shareholders can decide whether and when to sell their stock (government disposition would likely not get as good a return since the market would know the government had a fixed time to sell). And, as with all other corporations, it will be the shareholders, not the government, who will make the decisions on how to run the company.


President Reagan used to say, “We are a nation that has a government—not the other way around.” So, the people, not the government in Washington, should own the assets the government acquired (leaving aside the question of whether the government should have acquired the stake and how it was done without congressional approval).


Americans’ patience is wearing thin when it comes to government takeovers. The results are rarely in their favor. This bill is an opportunity to draw the line.