US Role In GM Bankruptcy Raises Foreign Auto Concerns
June 01 2009 - 9:38AM
Dow Jones News
The Obama administration's planned takeover of General Motors
Corp. (GM) raises questions about whether the government is giving
the auto maker a competitive advantage over foreign car
companies.
U.S. auto makers and their congressional allies have for years
accused foreign governments of giving an edge to their auto
industries through subsidies, currency manipulation and trade
barriers that hurt imports of U.S.-made vehicles. Now the U.S.
could be exposed to the same criticism as it takes further steps to
prop up GM and Detroit rival Chrysler LLC.
GM filed for Chapter 11 bankruptcy protection in New York on
Monday, the largest-ever U.S. industrial bankruptcy filing. The
U.S. government plans to provide $30 billion in additional
financing to restructure GM. That investment in GM, on top of $19.4
billion in earlier aid, illustrates the type of support foreign
auto makers said is designed to favor Detroit.
An Energy Department program to speed the development of
fuel-efficient vehicles gives preference to plants at least 20
years old. And a proposal making its way through Congress to
stimulate car sales through vouchers would exclude certain cars,
such as leased vehicles, that are the specialty of foreign auto
makers.
"It's one of those things where you begin to say, 'This is
really beginning to tilt the playing field,'" said Michael Stanton,
president and chief executive of the Association of International
Automobile Manufacturers Inc., which represents Toyota Motor Corp.
(TM), Honda Motor Co. (HMC), Nissan Motor Co. (NSANY) and others.
"We understand that's going to happen to some degree. It's the
amount of the degree that has us worried."
Edward Cohen, Honda's vice president for government and industry
relations, said Honda supports the Obama administration's effort to
sustain the domestic auto industry, but added, "At some point, it
crosses a line and begins to have some competitive implications,
and I think we've asked about that."
Obama administration officials have insisted their actions to
prop up GM and Chrysler are necessary to save jobs and prevent
further damage to a fragile economy. They said the intervention is
reluctant and intended to be as brief as possible.
"We are going to play as minimal a role as we can responsibly
play," an official close to the government's negotiations told
reporters last week.
The prospect of the U.S. government owning 60% of GM for an
indefinite period raises a host of other questions, including
whether policy decisions will ultimately be influenced by the
health of GM. Those decisions will cover matters such as
car-emissions standards, safety regulations and compensation to
GM's workers.
The Obama administration has said it would not run the daily
operations of GM, and that its main role would be to appoint board
members, thereby prevent politics from influencing the company. But
Douglas Elliott, a fellow at the Brookings Institution, a
Washington-based think tank, said politics coming into play might
be inevitable.
"There are going to be a lot of decisions over time which will
have differential effects on foreign auto makers and U.S. auto
makers," Elliott said. "If those decisions are made in a context in
which we own GM, there's going to be questions, and more than that,
there's going to be actual pressure to favor the U.S. auto
makers."
He said he believed the government's intentions were clearly out
of necessity.
"Certainly, I think the reason we're doing it is to not
particularly favor GM," Elliott said. "But, of course, that kind of
logic is the same reason foreign countries have done what they've
done."
Foreign car companies have largely supported the government
rescue of GM and Chrysler because of the industry-wide impact a
collapse would have on the fragile network of auto suppliers, which
serve multiple companies.
Stanton, of AIAM, said the administration risks crossing a line
when it explicitly endorses U.S. vehicles, as Obama appeared to do
last month during the announcement of Chrysler's bankruptcy
filing.
"We believe it is vital to retain and encourage a level playing
field for all," he wrote in a letter to Obama, adding that "actions
that lead to discrimination on the basis of company ownership will
harm" Americans who work for international auto makers.
Stanton said foreign auto makers will continue to scrutinize the
government's efforts to prop up the industry.
"We want GM to be successful," he said, "but we don't necessary
want them to be successful at our expense."
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com