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Not Wanted: Car Czar.

Posted by: David Kiley on February 16, 2009

The Obama Administration’s decision not to appoint some tough, experienced “car czar” to oversee the restructuring and financial viability plans of GM and Chrysler was predictable and foretold by a few executives and Capitol Hill sources in the past two weeks.

Why? By having a Treasury Dept. group reporting to the Treasury Secretary, the Obama administration can better control the outcome of the review. A “car czar” might come up with an assesment that is politically inconsistent with where the Administration wants this to end. And such a person could wind up leaking their own findings if the Administration doesn’t like what they read. This way, however it turns out, the Administration can shape and ultimately own the outcome.

There is not much appetite in the administration for pushing GM and Chrysler into bankruptcy. The impact on the United Auto Workers and GM retirees would be devastating under those conditions. That’s a constituency Democrats don’t really want to antagonize. Also, the unknown of the impact of a GM/Chrysler bankruptcy on the already devastated Midwest economy is not a movie the administration is anxious to see.

An auto industry executive with knowledge of the negotiations going on between GM and the UAW, and between both parties and the administration said this on Monday: “Two months ago I never would have thought there was much possibility of GM going into anything resembling bankruptcy…now I think its more like 50-50 or 51-49…But no question the administration wants to avoid it and I suspect they ultimately will avoid it.”

Reader Comments

Paul (Vw)

February 17, 2009 8:06 PM

Success has a thousand fathers, failure is an orphan.

One concern I have about not having a so-called Czar is that responsibility for failure does not clearly rest on one person's shoulders. I'm not so worried about the ability of the White House to spin things...I want someone who's on the line under pressure (and scrutiny) to make things work.

Maybe the administration will avoid bankruptcy, but that would be a low water mark for success. Right now the government is effectively printing money so that objective could easily be met. The only thing they haven't done is drop bags of bailout money from helicopters. The real measure for success should be that Detroit-3 (or Detroit-2) emerge as viable companies which can stand on their own--and we avoid rampant inflation. (and if that means a gov't structured bankruptcy with guarantees, then maybe that should be considered...even if it "antagonizes" constituencies)

Andrew Gross

February 19, 2009 11:45 AM

There needs to be a trail boss here. Typically when you have a committee set up it provides cover. Everyone’s responsible, but no one’s accountable.

Geithner has got his hands full trying to rescue the banking industry.

On the matter of what's needed now to unclog inventories of existing new vehicles on-ground at dealerships and factory lots in the US set to put people back to work at US company owned factories ASAP, I propose:

1. Offer direct federal access to funds to franchised new vehicle dealers for the purpose of accelerating loans for qualified consumers and fleet operators
Franchised new vehicle dealerships sales actualization requirements must also be taken into account in this matter as they are an integral part of the new vehicle sales "food chain."
If traditional funding sources don't want to, or find they simply can't sufficiently underwrite this business, let's seek out and provide motivated lenders who would then be provided access to special funds set aside by the Fed under special circumstances or rules established for this purpose.
2. Accelerate Special Offers for Fleet Operators to cycle their vehicles
This would include all private as well as public fleets not as yet contemplated by the present plan (i.e., non- Federal Fleet vehicles), to ensure fleets replace their vehicles as they would normally cycle them.
These offers should seek to balance alleviating inventories of existing new vehicles on-ground at dealerships and factory lots in the US, while phasing in offers for more fuel efficient vehicles as the existing inventories of new vehicles are more rationalized.
The offers could include everything from accelerated depreciation, cash incentives to guaranteed residual values.
3. Auto Manufacturer and Parts Supplier Shareholders' Guaranteed Value Plan
This proposal would reward long term stockholders of companies who pass similar, so-called stress tests now planned for the banking sector. For this purpose, "long term stockholders" could be defined as those who retain the stock for an agreed-to period of time.
The plan would contemplate developing a formula which would guarantee a certain "floor price" for qualified stock.
The benefits of such a plan would include taking a great deal of uncertainty out of the value of companies who remain in this space by virtue of a larger group of shareholders who, in effect, have been encouraged through this guarantee to hold onto their stock. These companies, in turn, would benefit from access to funds from the stock purchases as well as other financial benefits associated with increased stability.
4. National US Auto Industry "Super Sale"
Designate a short, specific time period where consumers would benefit from the acquisition of a new vehicle through any number of offerings (i.e., large cash incentives, pre-paid maintenance, extended warranties, accelerated tax incentives beyond those passed in the stimulus bill, etc.) all set to, again, unclog existing inventories and get people back to work.
Andrew Gross
Chairman & CEO
Automotive Consulting Services
(An Oregon Corporation)

David G. Pritchard

February 22, 2009 9:45 AM

I'm reminded of the old adage, "A camel is a horse that was designed by a committee. Highly functional, but ugly as sin!"
I fear that a committee will get so bogged down into what is "politically correct," that Detroit will fail to design and market cars that are acceptable to the public ... in which case, "no sale."
Right now Detroit needs an American version of the Camry with the drive train of of Prius. That cannot come from a committee, but a visionary company.

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