ASG Vice Chair Gutierrez op-ed in the Detroit News
In today’s The Detroit News:
JANUARY 8, 2014
Few governmental actions have been as controversial or as long-lasting as those made by Congress and two administrations in the crisis atmosphere following the 2008 economic collapse. Many are restarting old debates in the wake of the U.S. Treasury Department’s final divestiture this month of General Motors. But it’s time to move on, and to put this period of government ownership behind us.
I disagreed with President Barack Obama’s decision to allow the Federal Treasury to buy GM common shares. And I would have preferred that the company recognized its need to reorganize in an orderly and managed manner under Chapter 11 at the time it initially sought assistance. However, that is the past.
Many who opposed the government getting into General Motors have expressed criticism about the Treasury’s decision to sell off its 500 million shares at a loss. That’s a valid point. Perfectly timing the market is impossible, but it would be difficult to find a better time than now for the government to sell its shares.
Government ownership of GM stock represented an unprecedented and unnecessary entanglement between taxpayers and the private sector. The U.S. government is not a private equity firm or hedge fund, nor should it act like one. The federal government’s role as a major stockholder in GM represented a drag to the company and the industry as a whole. Continued ownership would have further distracted from the industry’s progress.
Today, the auto industry is indisputably back on its feet. And even though the bankruptcy process was modified, GM still restructured, shed costs and renegotiated legacy costs and emerged a strong company. This is no small task regardless of the government’s role.
As CEO of Kellogg, also headquartered in Michigan, I, like most CEOs was faced with the need to make difficult decisions with limited resources. It comes with the territory.
GM has made the difficult decisions necessary to restructure its company, and as a result has turned the corner. With a newly named CEO and recently announced investments of almost $1.3 billion in plant upgrades, this is a company that is once again contributing to our nation’s economic strength and creating much-needed jobs in auto states. For decades, poor decisions and lack of innovation led to low quality cars Americans did not want to drive. GM has begun to stem that tide, and as a result the awards for “Best of” and top quality accolades are piling up in the company’s trophy case.
Although GM is still in the early stages of its comeback and trying to win back previous customers, it is a different and stronger company today than it was just four years ago. Leadership knew that it had to undergo significant restructuring in order to improve the company’s financial fundamentals. By the looks of it, the moves appeared to have paid off. The company’s legacy costs are a fraction of what they were just a few years ago. The company streamlined brands and is selling more cars today under four brands than it did under eight. Labor contracts with the United Auto Workers were renegotiated to give employees a direct stake in the company and prevent strikes for five years. Sales and profits are up too. GM has had 15 consecutive quarters of profitability, and in the process added jobs — more than 25,000 in the United States since 2009.
The Treasury Department’s decision to sell the government’s shares in General Motors closes a chapter in American history. The company has turned the corner, and is well on its way to reclaiming its position as a profitable company Americans are proud of. Instead of relitigating the past, it is time to turn the page and celebrate the newfound strength and the future promise of one of America’s great companies.
Carlos Gutierrez served as the U.S. Commerce Secretary, 2005-09.