The GM Scandal Is Worse Than You Think
Here’s another reason government should never own a business.
In February 2010, the Obama administration’s transportation secretary, Ray LaHood, told America, without a shred of evidence, that Toyota automobiles were dangerous to drive. LaHood offered the remarks in front of the House subcommittee that was investigating reports of unintended-acceleration crashes. “My advice is, if anybody owns one of these vehicles, stop driving it,” he said, sending the company’s stock into a nose dive.
Even at the time, LaHood’s comments were reckless at best. Assailing the competition reeks of political opportunism and cronyism. It also illustrates one of the unavoidable predicaments of the state’s owning a corporation in a competitive marketplace. And when we put LaHood’s comment into perspective today, it’s actually a lot worse. The Obama administration not only had the power and ideological motive to damage the largely nonunionized competition but also was busy propping up a company that was causing preventable deaths.
No one is innocent, of course, but not everyone is bailed out. So Toyota, after recalling millions of cars and changing parts and floor mats even before LaHood’s outburst – and after years of being hounded by the administration – recently agreed to pay a steep fine for its role in the acceleration flap. This, despite the fact that in 2012, Department of Transportation engineers determined that no mechanical failure was present that would cause applying the brakes to initiate acceleration. The DOT conducted tests that determined that the brakes could maintain a stationary car or bring one to a full stop even with the engine racing. It looked at 58 vehicles that were supposedly involved in unintended acceleration and found no evidence of brake failure or throttle malfunction.
Attorney General Eric Holder kept at it, though, and Toyota finally agreed to a $1.2 billion settlement (it has about $60 billion in reserves) to make it go away. Though it looks as if the company doesn’t think the fight is worthwhile, for all I know, it’s guilty. I’m certain, though, that General Motors is. It announced this week that it was recalling over a million vehicles that had sudden loss of electric power steering. This, after recalling nearly 3 million vehicles for ignition switch problems that the company had known about since 2001 and are now linked to 13 deaths.
GM has apologized. But does anyone believe that the Obama administration took as hard a look at GM as it did Toyota? As early as 2007, the National Highway Traffic Safety Administration knew that there may be problems with air bags but never launched a formal investigation. The NHTSA’s acting chief, David Friedman, testified that GM never told the agency that faulty switches were at the root of the air bag problem. Fine. Before plowing billions of tax dollars into saving the United Automobile Workers, did the car czar or any other Obama officials take extra care to review DOT records to ensure that taxpayers would not be funding the preventable deaths of American citizens? Would DOT and Holder exhibit the same zealousness for safety with GM as they did when it came to Toyota? In the midst of the bailout debate and subsequent “turnaround,” news of a cover-up and major recall would have been a political disaster.
So it’s difficult to understand why this isn’t a huge scandal. If every obtuse utterance by an obscure Republican congressman gets the media juices flowing, surely the possibility of this kind of negligence is worth a look. Can anyone with access to the administration ask some of these questions? Because if you take credit for “saving” a company (actually, an “industry,” as no one would have ever driven again if Obama hadn’t saved the day), you also get credit for “saving” the real-life unscrupulous version of the company. “I placed my bet on the American worker,” Obama told union workers in 2012. “And I’ll make that bet any day of the week. And now, three years later, that bet is paying off.” Betting $80 billion of someone else’s money to prop up sympathetic labor unions isn’t exactly fraught with political risk. Unless it turns out that your administration is less concerned about the safety defects of the company you own than it is about the company you dislike. That would be corruption.
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