Under Criticism, Obama Soft-Pedals LaHood's Toyota Criticism

Transportation Secretary Ray LaHood’s get-tough quotes during the Toyota recall have generated significant backlash against an administration that is already knee-deep in the automotive industry. The governors of Mississippi, Kentucky, Indiana and Alabama (all of which host Toyota plants) laid into the NHTSA and Obama administration in a letter covered by the Detroit News. The governors argue:

Despite the federal government’s obvious conflict of interest because of its huge financial stake in some of Toyota’s competitors … it has spoken out against Toyota, including statements U.S. government officials have later been forced to retract… Toyota must put the safety of drivers first and foremost. However, they deserve a level and reasonable response from the federal government – one that is not tainted by the federal government’s financial interest in some of Toyota’s competitors

Strangely, the governors of Texas and West Virginia, where Toyotas are also assembled declined to sign onto the letter. Still, the attack isn’t being simply written off has home-state selfishness. One bellwether for the issue is the fact that the Detroit News looked past its own hometown interests and ran an editorial by the Cato Institute’s Daniel Ikensen, amplifying the governors’ critique. And sure enough, Obama decided to take the issue on head-on in an interview yesterday.

Every automaker has an obligation when public safety is a concern to come forward quickly and decisively when problems are identified. We don’t yet know whether that happened with Toyota. That’s going to be investigated. Obviously, Toyota has been an extraordinary automaker for a very long time, and I suspect that they will continue to be, despite this recent glitch

Equally typically though, Obama refused to take the allegations on directly. He did, however, comment on the political implications of the auto industry bailout, telling BusinessWeek:

The irony is, is that on the left we are perceived as being in the pockets of big business; and then on the business side, we are perceived as being anti-business. GM and Chrysler aren’t out of the woods yet, but there is an enormous opportunity for us to rebuild a U.S. auto industry that, absent our intervention, might not have been there, at least with those two companies. [The auto bailout was] a very politically unpopular decision that was made that, from my vantage point, is pro-business.

Yes it was very pro-business, if you define business as “GM and Chrysler.” Whether propping up two zombie automakers was good for the long-term health and competitiveness of the US economy is far from a settled issue. Certainly Ford might question whether the bailout was strictly “pro-business” given its clear disadvantages vis-a-vis its bailed-out crosstown rivals. As might the evil foreign companies that employ tens of thousands of Americans building cars in states like Alabama and Indiana.

It’s a pity that Obama didn’t take the opportunity to more directly acknowledge the intense pressure to further support the American-owned automakers, as every policy decision he makes between now and the government’s divestment of its GM and Chrysler stakes will continue to be interpreted through the lense of the government’s financial interests in the auto industry.