GM and Beyond

So it’s not only the banks that are “too big to fail”. It applies to the motor industry too. In an unprecedented move, what was once the world’s biggest business – General Motors – is now in the majority ownership of two governments, the US (owning a 60% stake) and Canada (12%). And so the push for public aid to the automobile industry has reached its most logical conclusion. Public aid has also been received by, among others, Toyota (which received $1.6bn), Renault and PSA Peugeot Citroën (which received €6bn between them), not to mention the general free-for-all in subsidies.

The new shareholders are hardly full of enthusiasm. Barack Obama has even promised not to intervene in company strategy, apparently forgetting that the appointment of the new CEO a few weeks ago was actually announced by the White House. Meanwhile, Canada’s Conservative government described the injection of public funds as “regrettable but necessary”.

The obvious unease in both Washington and Ottawa is understandable: the logic behind this latest intervention is far from clear. Unlike the difficulties faced by the banks, GM’s problems stem less from the current economic crisis than from the effects of welfare costs and its own past strategic errors.

If the aim is to launch tomorrow’s green car industry or to help GM’s employees make the switch, then nationalization is not necessarily the right way to go about it. In fact, nationalization will all too quickly bring the two governments face-to-face with their inconsistencies. Will they take responsibility for factory closures, for example? How long will GM’s rivals allow it to continue to offer discounts to customers while at the same time depending on the state for its survival?

The same difficult questions must be asked in Europe. By intervening directly in the rescue of Opel and handing it over to the thoroughly odd partnership of a Canadian parts manufacturer and a Russian bank, Angela Merkel seems to have demonstrated electoral opportunism rather than any industrial strategy. Her decision to reject a partnership proposal from Fiat, while simultaneously signing a joint statement with Nicolas Sarkozy calling on Europe to encourage the growth of world-class European businesses, requires at least some kind of critical discussion.

On both sides of the Atlantic, public interventions in the motor industry look less like the public sector’s well-planned return to industry than a general panic in which, alas, it is every man for himself.