The Great Debate

– Louis E. Lataif, a former president of Ford Motors of Europe, is dean of the Boston University School of Management. The views expressed are his own. —

Government ownership of General Motors (60% U.S. and 12% Canada) will be fraught with difficulties.

Given the large taxpayer stake in the company, it will be impossible for elected officials to stay out of the fray. Congress inevitably will interject itself in business decisions affecting employment, the kind of vehicles the company builds, or the company’s position on nationalizing health care – just as it is now asserting itself on the question of dealership closures.

Imagine the new General Motors (i.e., the government) attempting collective bargaining with the United Auto Workers’ union (on whose behalf the government stepped into the fray in the first place).

Consider the company lobbying Washington on an issue favored by the government (e.g., tax policy or the elimination of secret ballots for workers) but ill-suited for the company. And there there’s the matter of types of vehicles to be built.

– Louis E. Lataif is dean of the Boston University School of Management and a former Ford executive. The views expressed are his own. —

The federal government now wants to shore up ailing auto suppliers with a $5 billion bailout, despite a rising chorus of criticism against more government bailouts. The public is beginning to see bailouts as “transfusions,” rather than a closing of the wound, and is losing patience with them. The “wound” is falling housing values and toxic mortgage-backed securities which have paralyzed financial markets – not the auto industry.

The hastily approved $787 billion “stimulus package,” including aggressive spending programs unrelated to declining home values or the constricted capital markets, is tantamount to administering repeated, expensive blood transfusions rather than stopping the bleeding. Of course, if the blood flow at the wound eventually coagulates (one day the economy will rebound) then the transfusions can be claimed to have worked. But the delayed cure would have come at a crippling cost to the next generations of taxpayers.