By Phil Levy
Wherever else the status quo ante may reign, the Obama
administration has brought change to the tradition of sending foreign
dignitaries home with lovely parting gifts. Back in September, the chairman of
China's legislature was dispatched
with a new set of tire tariffs. Now, German Chancellor Angela Merkel has been
sent home with an auto
jobs program that won't start.
This latest gesture flows from the
U.S. government's majority ownership stake in General Motors. GM is a global
company and its empire includes ownership in a European subsidiary, Opel. Half
of Opel's 50,000 employees are in Germany. Thus, when GM was facing
bankruptcy this spring, the German government took a strong interest. It
offered a $2.2 billion loan to help Opel survive and preserve German jobs.
The Obama administration guided
GM through bankruptcy and on to a distinctive ownership structure. U.S.
taxpayers now hold a 61 percent stake in GM, with an additional 17.5
percent stake granted to the United Auto
Workers. The bankruptcy process concluded in
early July, at which point GM set about trying to become lean and mean. One
aspect of that was a move to sell Opel to a Russian-backed Canadian group
called Magna.
What does any of this auto arcana
have to do with foreign policy? Aren't these just the obscure fiddlings from
the back of the business pages? Well, consider the level at which this has been
handled in foreign governments. In August, when GM was still pondering whether
to sell Opel to Magna:
German Chancellor Angela Merkel expressed
her regret at General Motors' failure to choose a buyer for its German unit
Opel, and said that a decision was 'urgently' needed for the carmaker's future.
German Foreign
Minister Frank-Walter Steinmeier was on the phone with his U.S. counterpart and
reported, "Secretary Clinton said she would communicate the German
government's position within the U.S. administration."
That sounds a lot like a foreign
policy issue. There's more. After announcing its decision
to sell Opel to Magna in September, GM's board reversed itself yesterday. Here
was some of the commentary
from abroad:
General Motors' behavior toward workers is completely
unacceptable," German Economy Minister Rainer Bruederle told reporters the
morning after GM's shock news, adding: "General Motors' behavior toward
Germany is completely unacceptable."
In Moscow, Russian Prime Minister Vladimir Putin hinted the
battle for carmaker Opel was not over..."
President Obama has made
clear that he never aspired to run a car company and would like to get out
of the auto business. But the administration is in the same position as an
absentee landlord of a rundown property -- responsible, like it or not. The promises
that GM would be run in a hands-off, all-business fashion have not been
credible either to members of
Congress or leaders abroad. (This is not the only uncomfortable aspect of GM's
awkward ownership structure; GM's minority owners, the UAW, recently refused
to cut costs for GM's private-sector competitor, Ford. Imagine.)
If the administration is truly
eager not to run a car company, it could always divest. Sen. Lamar Alexander
(R-TN) put forward a
plan to do just that in July. It was voted down in the Senate, with leading
Democrats explaining that the time was not right. That raises the question of
just what the administration is waiting for. Unless the government plans
further infusions of cash into GM, or plans to intervene in GM's
decision-making, what benefit could there be to holding on to the company and
inviting unwelcome domestic and foreign pressures?
One possibility is that the
government is better able to predict GM's worth than the market. Perhaps the
administration's financial seers believe they can time the recent
run-up in stock market prices and ride it further with their $60 billion
bet on GM. Alternatively, the divestment
delay may just serve to hide the ultimate cost of the
administration's auto intervention.
Whatever the reason, the
entanglements deepen. The administration has been asked to provide further
billions for GMAC, a key financier of car purchases (formerly known as General Motors
Acceptance Corporation). Overseas, the Chinese have launched
an investigation of U.S. auto subsidies (the pot calling the kettle red?).
And we still have the issue of
German Opel angst. Perhaps this is why President Obama declined
Chancellor Merkel's invitation to travel to Germany to celebrate the
anniversary of the Cold War's End. Maybe he was worried about what she'd give
him in return.
Bundesregierung/Steffen Kugler-Pool/Getty Images
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