Just Say No To A Car Czar

According to the White House plan to aid General Motors and Chrysler with money drawn from the $700 billion fund voted by Congress, Treasury Secretary Henry Paulson will temporarily oversee loans to the two ailing auto giants.

After Jan. 20, President-elect Obama will need to choose his own more permanent overseer. This person, identified as "the president's designee" in the failed Auto Industry Financing and Restructuring Act, is now widely referred to as the "car czar."
 

The imagery and reality of a car czar is fraught with problems. First of all, under what authority will this person be able to orchestrate sacrifices required by the carmakers, United Auto Workers, bond holders, and suppliers to make the loan recipients economically viable and competitive by March 31? It is by no means clear what power, apart from personal suasion, such a person would have to resolve disputes and align interests among key stakeholders during the coming months.

Furthermore, arriving at a plan for economically viability by March 31, as stipulated by the White House, will not save loan recipients from bankruptcy unless the financial community judges the carmakers' debt to be commercially bankable. This final and most important judgment is not for the car czar, the White House or even Congress to make.

So, with little formal authority to force changes in a 50-year-old business model and an extremely limited role in certifying the economic viability of business plans submitted by loan recipients, how can the car czar truly be a czar?

What's even more problematic is that the concept of a bridge-loan program with or without a car czar has a dream-like quality in the absence of an economic stimulus program that gets fast traction and an immediate increase in the availability of consumer credit.

Unless the volume of car and truck sales recovers to the industry's current break-even point of 14.5 to 15 million units per year from its current run rate of around 11 million units, the Big Three cannot remain solvent--czar or no czar. There is no near-term financial problem facing General Motors (nyse: GM - news - people ), or any other automaker, that a surge in volume wouldn't cure.