Larry Kudlow, the White House’s top economic adviser, suggested the government may take an equity position in certain companies as a way of propping them up amid the worsening coronavirus outbreak.
“One of the ideas is, if we provide assistance, we might take an equity position,” is how Kudlow put it to reporters on Wednesday.
Jay Timmons, president and CEO of the National Association of Manufacturers, appeared on Yahoo Finance on Thursday and firmly pushed back on that idea.
Asked if giving up equity might make his members hesitant to participate, Timmons said, “the answer is yes. I mean, it's that simple.”
“I've talked to some of the smaller manufacturers as well,” he said. “They've said, quite bluntly, look if the federal government is going to attach strings or the federal government wants a piece of this business, I'm not going to do that.”
Kudlow had emphasized to reporters that the idea of government purchases of equity was one of many the Trump administration is considering.
This has some precedent in the U.S.: Perhaps the most famous example was in 2009. During the financial crisis, the Obama administration invested billions in General Motors through the Troubled Asset Relief Program.
It lead to the popular moniker “Government Motors.”
Observers have noted that Kudlow himself – then at CNBC – was a critics of the government’s intervention in GM. “It’s the bigger picture that has me most concerned” he wrote in 2009 “What does Government Motors say about the direction of the United States?”
The government sold all its shares in GM by 2013.
What the National Association of Manufacturers wants instead
Instead of equity stakes, Timmons is calling for a $1.4 trillion “Manufacturing Resiliency Fund” that would provide interest-free loans earmarked specifically for manufacturers around the country.
“Let's have a bridge,” he said, “to get us over this hump and make sure that our employees can stay on the payroll.”
The National Association of Manufacturers represents companies that, combined, employ 12.8 million manufacturing workers. Their ranks include both large manufacturers, like Siemens USA, as well as smaller manufacturers around the country.
The group is also calling on the government to adopt a federal designation that deems the manufacturing supply chain “essential” to help mitigate any interruptions in providing supplies.
The overall argument from Timmons is that everything should be done to keep manufacturing employees on the payroll on order to keep capacity, even if companies aren’t able to use it right now.
“We're working with the White House,” said Timmons, to find out how manufacturers “can repurpose their lines to make some of this much-needed, vital equipment” – from medical to consumer supplies to help respond to the crisis.
But if there are strings attached, some of that manufacturing capacity might soon be gone. “We don't want them to walk away,” he said of companies that might reject equity purchases. “We also don't want them to lose very talented workers who are desperately needed.”
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.
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