The eleventh-hour deal that Democratic and Republican lawmakers in Congress engineered to keep the federal government in business contained a notable cut: the Car Czar is no more. In actuality, the Car Czar hasn't been around for a while, as the last guy to hold the job, Ron Bloom, had moved on to other roles. But this does make you wonder: Who's really looking after the Treasury's equity stakes in General Motors (GM) and Chrysler?
GM still owes the government over $26 billion, and Chrysler is into Uncle Sam (and Canada) for $7 billion. Liquidating the GM equity position is largely a question of when GM's share price, post-IPO, gets above $50 per share. That would require consistent profits and a sustained stock market rally. The former may come from Japanese weakness in North America in the aftermath of the quake. But the latter will depend on a continued economic recovery.
Too many unknowns for the government to be asleep at the wheel
Chrysler's fate is more cryptic. Fiat CEO Sergio Marchionne, who's run Chrysler since the carmaker exited Chapter 11 in 2009, wants to refinance the outstanding loan debt and expand Fiat's stake to a full 51 percent before an IPO. The man's a juggler and a genius when it comes to finance, but at this juncture some supervision might be in order, lest Fiat-Chrysler admit enough outside banking interests to create a replay of the miserably failed private equity deal it forged with Cerberus Capital Management in 2007.
The point is that both Chrysler and GM represent a type of provisional industrial policy. This was IP driven by crisis, to be sure. But just because the crisis now seems to be over, that doesn't mean the situation can be turned over to a bureaucratic cadre at Treasury.
I can understand why Bloom is ready to move on. But the auto industry has proven to be so critical to the economy that making the position permanent, while not politically expedient right now, would be a reassurance to the taxpayers that their remaining stake is being looked after.
What about a manufacturing czar?
The auto industry was an immediate victim of the financial crisis. But the car business also led the country out of recession, and has taken up a leadership position in a manufacturing-led revival of the economy. So perhaps the role of Car Czar should be enlarged. Then it would be okay that the job no longer really exists -- if the government recognizes that "old economy" needs to be guided into the future.
Yes, I know, this reeks of socialism and may have no chance heading into a presidential election with a divided Congress and a belligerent quasi-libertarian force, in the Tea Party, harrying the GOP's right flank. But if President Obama wins a second term next November, there'll be an opportunity to prepare the country for its next recession.
Learn from the past, or repeat it until the economy collapses
GM and Chrysler disappeared into bankruptcy because no one with a sense of how the modern economy works was paying close attention to their operations. GM was serially mismanaged even when it was making money in the early 2000s, and Chrysler went directly from a failed merger with Daimler into the dark clutches of Cerberus. It took a flashy finance guy -- maybe too flashy -- in Steve Rattner and a labor specialist in Bloom to clean up the mess.
I'm not sure who should helm U.S. industrial policy, but it's clear that greater integration of the country's manufacturing operations will be important as the country goes into its next cycle of economic competition against China and Brazil. There's nothing new about the debate, of course. A 37-year-old Robert Reich was arguing for industrial policy in 1983 -- right at the beginning of the finance-fueled mega-bubble that culminated in the Great Recession.
Come to think of it, maybe Reich is the right man for the job.