An Early Test For the Obama Administration

Assuming GM and Ford are still in business by January 20, relief for the sagging U.S. auto industry will likely be a high priority for the Obama administration.  Targeting that relief to the development of fuel efficient and alternative energy vehicles would advance a number of the administration’s “bottom-up” economic goals by making U.S. automakers more competitive, retaining blue collar jobs in the hard-hit industrial Midwest, and jump-starting the alternative energy industry. 

Although the idea seems a “no-brainer,” a GM production plant in Lordstown, Ohio is a case in point in how difficult it will be to provide effective targeted relief.  As recently as this summer, GM announced the creation of nearly 1,000 new jobs at the plant in Northeast Ohio to increase production of a line of fuel-efficient cars, but this week the company’s deteriorating financial condition caused GM to backtrack and layoff nearly the same number of workers at the Lordstown plant.  A UAW local president summarized the problem succinctly:  “We have no control over the situation.  People are just not buying cars.”

So which needs to be stimulated first, the national economy so that consumers will once again buy cars, or the U.S. auto industry so that it will produce efficient cars that consumers will buy?  It’s an early question the Obama administration must answer.