Hi DT:

My point isn't that the US auto industry is a paradigm of unmatched quality. I don't believe that to be the case at all. I would suggest that with trucks and SUV's they were responding to consumer demand, though. But that's all irrelevant.

The issues with the Administration's latest moves are

1) By what right does the federal government take it upon itself to fire the head of a private company? There's no statute that allows the President to do that. His aides were talking about remaking the board of GM. Again, even if Obama's team were competent enough to do that, what gives them the right? Who else is eligible to be fired by the President?
What gives the President the right to dictate mergers?

2)The Administration appears to have a thinly disguised dislike of "old technologies" such as coal and internal combustion engines. Well fair enough. But there are millions of people that make their living through those technologies. It's not at all clear that American consumers want or will pay for "green" cars or will pay extra for electricity through cap-and-trade schemes. Either way it should be up to the consumer market to make those decisions, not the Administration.

3) In Michigan there is currently growing unity around the idea that the auto industry is getting the shaft while the banking industry is literally being wined and dined. For this to happen in a place as politically/racially/economically divided as Michigan is nothing short of astounding.

Here there are left-wing people that sound like Pat Buchanan and right wing people that sound like Noam Chomsky when it comes to the auto industry and trade issues. People see that AIG alone lost $61 billion in one quarter and no one said boo about giving them more billions while a loan request from the auto industry for a smaller amount causes apoplexy.

4) The primary cost difference between the traditional Big Three and their German or East Asian competitors is not labor cost or material cost. It's health care-primarily retiree health care. The Big Three already ended (white collar) retiree health care benefits in 2007-8. Those people now have to be on Medicare or scramble to get supplemental coverage if they can. The foreign companies all have government provided health care in their home countries and have generally not been operating in the US long enough to build up massive legacy costs. So when the President talks about people "giving up more" he is taking dead aim at the remaining health care benefits of unionized workers (current and retirees) and current white collar workers.
The UAW already opened up the contract to increase the worker contribution to health care, create a jointly run health care fund and allow the companies (well at least Ford) to substitute stock for cash in this fund.

Perhaps the companies should be able to immediately refuse to pay for health care. That would solve much of their cash problems but not immediately-certainly not in 30 or 60 days. It would involve the breaking of contracts-something the Administration didn't want to do in the AIG case.

But the most important point in all of this is political. Regardless of whether or not it is the "right" thing to do, the people in Michigan that voted for Obama certainly didn't do so thinking he would cause them to lose their health coverage or job. So if the Administration gets too closely identified as one that is unfriendly to the auto industry, Michiganders will remember that in 2010 and 2012.