Detroit Free Press Tom Walsh Column: Snow Sees Things Differently Now

From the Detroit Free Press

Funny how a guy’s perspective on the weather can change when his own house lies directly in the path of a hurricane.

That’s what I kept thinking Wednesday as I listened to John Snow, chairman of Cerberus Capital Management, speak to the Detroit Economic Club about Cerberus’ growing role in the U.S. auto industry with the recent acquisition of 51 percent of GMAC from General Motors Corp., and the pending purchases of Chrysler Group and Novi-based supplier Tower Automotive.

This is the same John Snow I interviewed in November 2005, when he was U.S. treasury secretary, and asked what could be done to help Detroit and Michigan shake their economic funk and resume growing like the rest of the U.S. economy.

Back then Snow’s boss, President George W. Bush, was steadfastly ignoring squeals of distress from Detroit and dodging requests for a meeting with the Detroit auto company chief executives. And Snow, loyal Bush cabinet member that he was, spouted the White House line that the U.S. economy was in swell shape and eventually would lift all boats, even in Detroit and Michigan.

"I think the best help is to do the things we’re doing to improve the overall strength of the economy — good tax policy, lifting regulatory burdens and continuing to push on reducing health care costs," Snow told me then.

Of course, the government in Washington, D.C., did nothing of note in 2005 or 2006 or 2007 to reduce health care costs. And now that Snow’s Cerberus is soon to own Chrysler, a company with a staggering burden of $2.1 billion a year to provide health care for current and retired workers, he declares — as he did Wednesday — that the U.S. health care system is "broken."

"It’s really time that we deal with this problem," he said.

Indeed.

It’s also interesting to hear a guy who, as treasury secretary, shrugged off suggestions that Detroit or the auto industry needed special treatment or attention now yelp that Detroit and its automakers are being unfairly hurt by the current U.S. Senate bill to boost fuel economy to 35 miles per gallon by 2020.

The Senate bill’s approach carries "a risk of sinking the U.S. auto industry," Snow said Wednesday.

At the very least, it could make the Chrysler purchase a lot less attractive for Cerberus. Onerous fuel economy targets could require Cerberus to sink more capital into Chrysler and raise variable costs on vehicle production, Snow said.

In other words, perhaps Detroit and its auto industry should get some special consideration for their unique issues and burdens.

None of this means John Snow is a bad guy. It just means that your perspective changes depending on where you sit. When you’re a cabinet member for a U.S. president, you stick to the script and try to carry out the president’s game plan. When you chair a private equity firm that’s buying a big Detroit auto company, you push for whatever might boost sales and profits and oppose policy that might put Chrysler at a relative disadvantage to key competitors.

Snow acknowledged as much — sort of — in a brief interview Wednesday.

Overall, he contended, the Bush tax cuts have helped boost the nation’s overall economic growth. "But Michigan hasn’t shared proportionally in that growth," he admitted. "Good broad economic policy doesn’t solve all problems."

When Chrysler found itself on the brink of failure in the late 1970s, the federal government helped keep it afloat with loan guarantees. Today, Snow said, it’s private equity that will ride to the rescue and return Chrysler to profitability.

But if government wants to help out by paying special heed to Detroit’s special needs in the areas of health care and fuel economy, well, Snow would be grateful.