What Non-Interference Really Looks Like

Several months ago when the government decided to bail out incompetence and distort free market accountability for poor business decisions by effectively taking over General Motors, the White House promised that the new entity would have to abide by sound financial principles. Congress promoted the same concept, agreeing that "saving" GM was good for jobs and hence the nation.

I won't rant (this time) on how my undesired investment in GM continues to lose market share while bailout-free Ford gains. But it is worth looking at how the promise of non-interference is holding up. Aside from some CAFE shenanigans and the appointment of a rather interesting board of directors, President Obama and the executive branch have remained somewhat detached. But Congress?

The White House is girding for battle with lawmakers who want to bail out thousands of car dealers set to close as part of the bankruptcy reorganizations of General Motors Co. and Chrysler Group LLC. Salvaging dealers could also jeopardize the government's ability to recover the $60 billion in federal funds used to rescue the car companies, administration officials say.

The House approved a measure last week that would force GM and Chrysler to restore dealer rights under state franchise agreements by stopping the administration from handing over government funding until they do so. The measure, attached to a spending bill, would force auto makers to reopen dealerships, hold off on plans to close others and increase severance payments to rejected dealers.

The Senate is crafting its own version of the spending bill that currently doesn't include the dealer aid. Meanwhile, lawmakers in the House and Senate are also preparing separate pieces of legislation that would directly compel GM and Chrysler to reinstate franchise agreements.

I have to give some props to the White House for fighting Congress' desire to reopen dealerships. Bill wrote a great piece a couple months ago that described in detail how GM needs to actually close far more dealerships to achieve Toyota and Honda levels of distribution cost.

By my math, GM needs to dump 4,000 dealers to get to the Honda/Toyota benchmark - not 2,600.

By deploying such an obese dealer network, GM has put the dealers in the service business - with the unintended consequence of making defects the dealer's best friend. Couple that with a 'low cost is all that matters' mentality hammered into the suppliers and it should come as little surprise that GM has been perceived as a worse value than Toyota and Honda for as long as the Japanese have been operating in the US.

So instead of reducing GM's dealer base even further, Congress wants to overturn the dealership closings... for an already much smaller GM. Interesting strategy to "abide by sound financial principles."

The dealership fight is a key test of the White House's ability to keep individual lawmakers from meddling with GM and Chrysler, now partly owned by taxpayers, as the companies attempt to recover from years of plummeting sales and losses.

In a sometimes-feisty exchange Tuesday, the administration's chief auto adviser, Ron Bloom, warned a House panel that "political intervention" by Congress could threaten the future success of GM and Chrysler, and that the administration "strongly opposes" congressional efforts to reinstate as many as 3,200 dealerships cut through the bankruptcy.

Reinstating the dealers, Mr. Bloom said, "would set a dangerous precedent, potentially raising enormous legal concerns, to say nothing of the substantial financial burden it would place on the companies.

And that's not the end of the meddling.

Beyond the dealership push, lawmakers are fighting to persuade GM to salvage plants it has promised to shut down as part of its downsizing. Legislators are also investigating the role played by the administration's auto task force in deciding which plants and dealerships would close.

Now... what does this meddling after promising no meddling say about a Congress that now promises a health care overhaul where politics and politicians won't get between me and my doctor...

Right. Who's kidding who?

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