President Obama boiled down his three goals as the reluctant majority shareholder of General Motors this way on Monday: “To get G.M. back on its feet, take a hands-off approach and get out quickly.”
If only it were that easy.
Over the next few months, Mr. Obama and his auto task force will face many tests as they try to create a new paradigm for the nationalization, however temporary, of a storied and troubled emblem of American industry.
While Mr. Obama will most likely come under extraordinary pressure to sell the government’s 60 percent stake in the “new G.M.,” his own auto task force has warned him that the exit strategy could be messy: the faster the government sells its stake to private investors, the less it is likely to recover its investment of more than $50 billion in the company.
And the longer the government holds on to its stake, the longer the pressures will build, from Congress and elsewhere, to intervene.
That process has started already. Mr. Obama has made it clear that he wants G.M. to produce small, fuel-efficient cars with a modest carbon footprint. But exactly what role the government will play in pressing G.M. to get on that long-delayed path, beyond the regulations it sets for the entire industry, were left curiously vague on Monday.
“What we are not doing — what I have no interest in doing — is running G.M.,” Mr. Obama insisted at the White House, trying to pre-empt the suggestion that just because Washington has ultimate responsibility for the company does not mean he plans to exercise his prerogatives. Asked later what exactly Mr. Obama meant, Steven Rattner, a key figure on Mr. Obama’s auto task force, said: “No plant decisions, no dealer decisions, no color-of-the-car decisions.”
Walking that fine line between micromanaging and making sure G.M. gets back on track after 40 years of ignoring market realities is the drama that is about to play out in Detroit and Washington.
Already there are signs that both Mr. Obama and the company will face inevitable tradeoffs when political pressures, manufacturing realities and the need to maximize the interests of taxpayers and consumers come in conflict.
Mr. Obama has gotten a taste of them already. Members of Congress have called the leaders of his auto task force to complain about the closing of a single Chrysler dealer — one with powerful political friends. On Sunday, as Mr. Obama briefed Congressional leaders on the impending G.M. bankruptcy, one pressed him for a commitment that the “new G.M.” will not move its headquarters out of Detroit.
“He said that was a commercial decision, that he wouldn’t get involved,” said one senior administration official who had seen a summary of the call. “But that’s not the last request like this we are going to get.”
Or the hardest, by far. G.M. insists that under the new, more flexible arrangements it has negotiated with the United Automobile Workers, it will be able to build more small cars in the United States than ever before.
But sooner or later, the company’s environmental goals are bound to come into conflict — again — with its overarching need to prove that the new G.M. can turn a profit, the necessary step before private investors and lenders will step back in.
Profits will also dictate decisions about building cars in lower-cost countries like South Korea or China, decisions that the old G.M. faced every day. As soon as that happens, there will be protests in Detroit and on Capitol Hill that as long as G.M. is owned by American taxpayers, its cars and components should be produced on American soil.
Conversely, if the Obama administration sought to block a Chinese or Indian auto start-up from entering the American market, it would most likely be accused of protectionism. That would be an echo of the charge the United States used to level against Japan.
In interviews in recent days, Mr. Obama’s economic team said it anticipated those pressures, and had moved to cut them off early.
“It started right around the time of the bank stress tests,” said Rahm Emanuel, Mr. Obama’s chief of staff, in an interview on Monday. During one of the president’s daily economic briefings, Mr. Emanuel added, “he said that taking over companies like this is a big deal, and that no president has ever faced anything like this before. And he said he wanted to see some rules of the road about how the government should act” when it suddenly becomes the biggest shareholder in the market.
Mr. Obama clearly wanted protection: a set of principles he could hand to angry members of Congress, campaign contributors or executives to explain why he would not call Fritz Henderson, G.M.’s chief executive, to discuss whether an engine should be made in Saginaw or Shanghai.
The result was an interagency task force informally called “The Government as Shareholder,” headed by Diana Farrell, the deputy director of the National Economic Council and formerly the head of the McKinsey Global Institute, the research arm of McKinsey & Company.
It was Ms. Farrell’s report, delivered to the Oval Office fewer than 10 days ago, that laid out the principles that Mr. Obama described on Monday.
The White House insists the principles will apply equally to the government’s investment in the American International Group, the fallen insurer, or in Citigroup and other banks that the government has rescued.
So, just as George Bush spent much of his presidency seeking a way out of Iraq, Mr. Obama may spend much of his seeking a way out of the morass of new government investments in the private sector. The hardest part will be knowing how to time the withdrawal of government support — a balancing act between maximizing the investment of taxpayers and risking the company’s fragile state.
“The more uncertain the economic environment, the stronger the tension,” Ms. Farrell acknowledged in an interview on Monday. “The view is that we want to reduce the ownership stake as quickly as practicable, and to do so deliberately as part of a considered exit strategy.”