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Does GM Stand For Government Motors?


It's MORNING EDITION from NPR News. Good morning, I'm Steve Inskeep.


General Motors says it's confident it can steer a course through bankruptcy court and emerge as a smaller and more competitive automaker. The company filed for bankruptcy protection yesterday, quote, "with regret." CEO Fritz Henderson tried to put the best spin on it.

FRITZ HENDERSON: Today marks the beginning of what will be a new company, a new GM dedicated to building the very best cars and trucks.

MONTAGNE: NPR's Scott Horsley reports.

SCOTT HORSLEY: President Obama says the federal government never wanted to be in the car business. He only decided to rescue GM and its smaller rival, Chrysler, because he says the health of the overall economy depended on it. Mr. Obama calls the U.S. a reluctant shareholder.

BARACK OBAMA: In short our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.

HORSLEY: Hands-off is a relative term. The federal government has already fired one chief executive at GM. It rejected the company's original restructuring plan as inadequate. And the government will handpick most of the members of a new board of directors. Once that's done though, Mr. Obama says day-to-day management will be left to the car guys.

OBAMA: When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.

HORSLEY: There will not be any government officials on the board. And the government says it will generally behave like any other commercial investor, with an eye towards maximizing taxpayers' return. One senior administration official likened the government's role to the mutual fund Fidelity, which owns stock in companies but doesn't try to micromanage them. Douglas Elliot, who studies business and public policy at the Brookings Institution, says that only goes so far.

DOUGLAS ELLIOT: Even in our capitalist society, the government plays a lot of roles, whereas Fidelity really is just an investor. So if they decide to act like just an investor, nobody thinks it's strange.

HORSLEY: Fidelity doesn't set fuel economy standards, for example. But the government does. What happens if the Obama administration's environmental goals conflict with GM's rapid return to profitability?

ELLIOT: You're also going to have, like it or not, issues with - are you favoring GM over Ford? And are you favoring GM over Honda, who builds in America, Toyota who builds in America, etcetera?

HORSLEY: Foreign automakers say they support the government's efforts to help the industry, but they're concerned that its GM ownership not compromise what they call free and fair competition. The government itself is a major buyer of cars and trucks. This spring the General Services Administration bought thousands of hybrid vehicles as part of the economic stimulus plan. Nineteen hundred came from Ford, only 1200 from GM. Another round of purchases is expected soon. As part of its deal with the United Auto Workers, GM agreed to build a small car in the U.S. rather than in China as it had planned. That may not help taxpayers recover their investment faster, but it still won praise from Mr. Obama.

OBAMA: In fact, if all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades.

HORSLEY: And that's where the government is likely to face the most pressure to play a more active role at GM where it comes to jobs. The Brookings Institution's Elliot says even if the administration wants to stay hands-off, Congress will have other ideas.

ELLIOT: There's no way Congress will sit still and just say, oh no, we understand you want to be a passive investor, so that's okay.

HORSLEY: Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.