No one will defend GM’s outgoing CEO Rick Wagoner: the company needs a top-to-bottom overhaul. More than an overhaul, GM needs a downsizing — a downsizing that customarily, and often effectively, comes by way of a bankruptcy court. That’s why it’s an important development that the President dumped the CEO, because it makes perfectly clear that the government is in charge of GM.

Everything that the federal government says now about GM and Chrysler has to be understood in this light: Administration and Congressional leaders could have accelerated the revamp of these companies last fall, or earlier this year. Now, they're imposing new deadlines. Blaming the executives of GM and Chrysler is no longer an option, though it will be tried. Bankruptcy now will be Washington’s failure, not Detroit’s. If the government doesn’t want GM in Chapter 11, it won’t happen.

Firing Wagoner may make the government’s control clear, but that control is not new. Through all manner of federal regulations (labor, environmental, financial), the federal government has helped to shape today’s domestic auto industry. In that sense, Sunday night's firing of the CEO is less indicative of the government’s intrusion than the Friday afternoon release of new Corporate Average Fuel Economy standards for 2011. By raising CAFE standards 8% for cars and light trucks, to 27.3 mpg, and stipulating that new cars will have to meet a standard of 30.2 mpg, the federal government is mandating new development and production costs, and ensuring higher retail costs for domestic automobiles.

Never mind whether or not the CAFE standards make the cars better, or more marketable, or more profitable for the producers. Those points are highly debatable. The question to be asked is whether or not this is a credible approach for a manufacturer to take when it’s struggling for survival. If federal officials are sincere in their stated goal of restoring GM and Chrysler to competitiveness, a new management team might be in order. Imposing billions of dollars in new costs is not a sensible route to that end.