The U.S. auto industry this week got a dose of "tough love" from President Barack Obama. While needed, there lies an inherent risk of crossing the line and invoking too much government power.
The president put both GM and Chrysler on notice that they'd better get their houses in order or Uncle Sam would. Both need continuing taxpayer investment to stay afloat.
President Obama gave GM 60 days to produce an aggressive restructuring plan, starting with the ouster of GM CEO Rick Wagoner, not because Wagoner did a bad job, he said, but because GM needs new blood, new ideas. Already infused with $13.4 billion in federal cash, GM won't get a dime more in taxpayer dollars unless the president's demands are made.
Likewise, Chrysler faces a 30-day deadline to partner up with Fiat. Lacking a merger, Chrysler also won't see additional federal money. The outcome, President Obama, said would be filing for Chapter 11 bankruptcy and letting the courts restructure the automakers.
The real question is whether the Obama administration will follow through on its threats, that it would allow two of the nation's largest automakers -- Ford seems to be doing OK -- to fail. Are they in the so-called category of "too big to fail"?
A lot of key reforms need to be made, and even outlining them may take more than 60 days let alone accomplishing them. Seeing concessions from the United Auto Workers may be near impossible. Auto industry salaries and benefits remain high, compared to competing foreign automakers, and that alone may lead to the demise of GM and others. The administration seeks efficiency though closing more plans and narrowing the number of brands it produces. With 90,000 employees and plants in two-thirds of the states where each is a sizeable chunk of that community's economy, making those cuts won't come without a fight.
Perhaps forced restructuring through bankruptcy is the answer, a move that may make America's auto industry more lean and competitive.
The dark cloud is how far should the government go. Taxpayers will own a greater and greater share with more investment, and with promises such as President Obama's pledge that the government will stand behind new car warranties.
With the federal government already heavily involved in insurance, financial houses and banking industries, further movement into the manufacturing sector does give a quiver when one mentions "nationalizing" sectors of the economy.
It's truly a fine line, and we hope President Obama knows where that is.