Car industry reacts to Obama's announcement

March 30, 2009 6:53:15 PM PDT
The president's announcement marks a new phase in the administration's turnaround efforts. The starker than expected move is a message that reaches far beyond the auto industry.

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President Obama is trying to integrate some tricky moving parts in this automobile restructuring.

You've got a union that strongly supported the president. You've got the public's anger over bailouts and you've got an industry that isn't the giant it used to be, but still one way or another employs a significant number of people.

President Obama used his unprecedented leverage over private industry to reject the U.S. automakers restructuring plans and force out General Motors Chief Rick Wagoner.

"We also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars," said President Obama.

Almost immediately, Michigan Senator Carl Levin accused the president of treating the auto industry unfairly, and cynically making Wagoner a sacrificial lamb.

At UC Berkeley, Jack Citrin is Director of the Institute for Governmental Studies and author of a book on cynicism and politics. He believes that the president was sending a message.

"And this latest act is essentially is a almost like a warning shot across the bow I would say. To a bunch of other companies, that if we feel you're not going to make it, we're going to one, change your leadership and two, we're going to allow you to go bankrupt," said Professor Citrin.

Daniel Vencill is a specialist in labor economics and monetary policy. He believes the president's firing of Wagoner was also a message to the Europeon leaders he'll be meeting with later this week.

"This is just sending a tough message that everybody is got to make some tough sacrifices. We're not going to have any more AIG's," said Professor Vencill.

A lot of the money that went to AIG was passed on to European banks that held policies with the insurance giant.

Professor Vencill is also convinced the president is also laying the ground work for what he believes will be gm's inevitable decent into bankruptcy -- a move that will break union contracts but might not hurt politically

"You know, if Toyota can operate in the United States with lower union contracts, why can't General Motors?," said Vencill.

Both experts believe the president won't face much political heat from lawmakers like Michigan's Carl Levin.

In Freemont, where General Motors is teamed with Toyota at the Nummi auto plant, we asked Fremont Congressman Pete Stark for his reaction to the president's plan.

He told us President Obama is right to hold GM and Chrysler accountable and demand that they come up with a business model that works.

The politically reality is there's a lot more anger over bailing out failed companies than there is for the automobile workers union.

The UAW will be hurt if GM goes into bankruptcy, but it doesn't mean the end of the economy, and because of that the auto industry is being treated differently than some of the financial institutions that have been rescued.

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