Purely symbolic?

Auto industry experts unimpressed with GM CEO’s firing

Peter Marcus, DDN Staff Writer

Tuesday, March 31, 2009

President Obama’s extraordinary move to force the departure of General Motors’ chief executive is being viewed by local auto industry leaders as purely symbolic.

“I was disappointed but not necessarily surprised,” said Tim Jackson, president of the Colorado Automobile Dealers Association, of the news Sunday that General Motors Chief Executive Rick Wagoner would step down immediately as part of a government-led restructuring. “I do think that Rick Wagoner, in this particular scenario, is a sacrificial lamb. But that’s not so unexpected.”

Analysts believe Obama forced the resignation as a symbolic message to Americans that his administration would not be supporting financial bailouts for an American auto industry that refuses to adapt to a rapidly changing business climate.

“Our auto industry is not moving in the right direction fast enough,” Obama said yesterday in a statement read at the White House.

The Bush administration last year already approved $17 billion in federal loans to help GM and Chrysler, LLC. GM is asking for $16.4 billion more.

Obama said yesterday that he would offer “adequate working capital” over the next 60 days to assist GM in its restructuring.

The picture is a bit more grim for Chrysler, said Obama. The government will only consider investing up to $6 billion more into Chrysler if the company is to reach an alliance with Italian auto maker Fiat SpA.

But Obama placed greater emphasis yesterday on the possibility of using bankruptcy as a tool for survival. Unlike normal bankruptcy, the process would be an expedited controlled process led by the government.

In preparation for such a massive restructuring process, Obama also announced yesterday that the federal government would back the warranties of all U.S.-made autos and trucks, in an effort to reassure concerned consumers.

But John Medved, owner of Medved AutoPlex, said the Obama administration is wrong if it thinks forcing the resignation of an auto industry executive will bring about positive change.

“The Obama administration wanted to make a statement that they were for real, and I think they picked off the most high profile person … they shot him in the head and threw him in the street and said, ‘We’re for real,’” said Medved, who has attended business meetings with Wagoner.

Medved said yesterday following the second annual Rocky Mountain Auto Summit that Wagoner was a capable executive on the right path toward guiding GM to success.

“It’s like a great stage show or musical,” he said following the summit. “Everything was all ready to go, all they had to do was pull the curtain up and get going with it. Unfortunately, that didn’t happen.”

Medved watched as his staff declined from 600 two-and-a-half years ago to only 275 today. He’s listened to employees speak of moving their families into the homes of their in-laws just to keep a roof over their head; and countless stories of employees struggling with bills.

“It’s terrifying to think of,” said the 2009 Colorado car dealer of the year.

Jackson and Medved both said the government needs to make consumer confidence a priority. Massive advertising campaigns should be launched convincing Americans that they should be buying U.S.-made cars, the industry experts said.

Medved even equated it to a similar push made during World War II when consumer confidence for U.S.-made products was at an all time high.

One industry-specific proposal to restore that confidence is to offer a $10,000 tax credit to any U.S. taxpayer who purchases a new car. The proposal has been touted by John W. Scherer, chief executive of Lakewood-based Video Professor, Inc., who spoke yesterday at the auto summit.

The government is already allowing new car buyers to deduct both the local and state sales tax paid on new car purchases. But critics say it doesn’t go far enough.

“The problem that we have is that people are interested in buying new cars, they just don’t have the confidence to do so,” said Jackson. “It’s all part of the bigger picture. President Obama, in this case, needs to be focused on the overall economy and those things he can do to instill consumer confidence.”

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