GM CEO resigns at Obama's behest

**MOUNTAINORACLE** · March 30th, 2009, 01:34 AM

http://www.politico.com/news/stories/0309/20625.html

GM CEO resigns at Obama's behest
By: Mike Allen and Josh Gerstein
March 29, 2009 05:23 PM EST

The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.

On Monday, President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department.

The White House confirmed Wagoner was leaving at the government's behest after The Associated Press reported his immediate departure, without giving a reason.

General Motors issued a vague statement Sunday night that did not officially confirm Wagoner's departure.

"We are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement," the company said.

The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts.

Wagoner has been CEO for 8 years and at GM for more than 30. It is not yet clear who would replace him, or what role the administration would play in that process.

Industry sources had said the White House planned very tough medicine in Monday's announcement, which turned out to be an understatement. And it went to the very top. The measures to be imposed by the government will have a dramatic effect on workers, unions, suppliers, bondholders, shareholders, retirees and the communities where plants are located, the sources said.

GM and Chrysler first requested billions in federal aid in November, warning that they could run out of cash in a matter of months if they didn't receive it. In December, President Bush agreed to loan $9.4 billion to GM and $4 billion to Chrysler.

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Last month, GM asked for $16.6 billion more and Chrysler requested an additional $5 billion.

Earlier this month, Obama agreed to loan $5 billion to American auto parts manufacturers to help them weather the steep drop in new vehicle orders and the financial uncertainty at the Big Three.

Obama and his aides may have honed in on Wagoner for two reasons. First, his company is asking for the most in total federal aid: $26 billion, a figure administration officials fear could grow even larger. Second, the GM chief was tied more directly to the ill-fated decisions that that brought much of the American auto industry to the brink of collapse. Wagoner joined GM in 1977, has had a senior role in GM management since 1992, and became CEO of the company in 2000. He is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years.

By contrast, Chrysler CEO Robert Nardelli, whose resignation does not seem to have been demanded as a price of further federal aid, was a newcomer to the auto industry when he was lured to that company to help turn it around. Nardelli had previously headed Home Depot.

Government officials have little reason to tilt at Ford CEO Alan Mulally since his firm has not actually taken bailout funds from the government. Ford asked for a $9 billion line of credit from the feds, but the firm has said it has no plans to tap the credit facility.

Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees.

Obama said Friday in an interview with CBS’s “Face the Nation,” broadcast Sunday, that the carmakers were going to have to do more.

“There's been some serious efforts to deal with a combination of long-standing problems in the auto industry,” the president told host Bob Schieffer. “What we're trying to let them know is that we want to have a successful auto industry, U.S. auto industry. We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is.

“And that's gonna mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody's gonna have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road."

Schieffer followed up: “But they're not there yet.”

Obama added: “They're not there yet.”

The Obama administration calls its task force “a cabinet-level group that includes the secretaries of Transportation, Commerce, Labor and Energy. It will also include the chairman of the President’s Council of Economic Advisers, the director of the Office of Management and Budget, the EPA administrator, and the director of the White House Office of Energy and Climate Change. The Task Force will be led by Treasury Secretary [Tim] Geithner and [National Economic Council] Director Larry Summers.”

The panel’s chief adviser is Steven Rattner, a well-known investment banker and former New York Times reporter.

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Wagoner may be responsible for GM's current condition and if GMs board of directors had any balls they would have axed Wagoner a long time ago. However there is something BIG TIME wrong with the President demanding that he step down. This the first time a US president dictated the leadership of a publicly traded company.
IMHO we will be seeing more of this; the government is taking over the private sector as well as the financial sector & they are hard at work with plans to take over the health industry.
This sure doesn't look like CAPITALISM; its looks a lot like FASCISM.

Rant off.

oracle

**autotech6506** · March 30th, 2009, 06:41 AM

whoa what?!?! Obama has officially crossed the line! CEO should have told him to pound sand! How did it go over when Obama asked the people at AIG to give their bonuses back?

**FNG19** · March 30th, 2009, 08:05 AM

Don't kid yourselves about any of this smoke and mirrors about the auto industry. It's all about saving the unions. Here are the money lines that show it, IMHO, from another article about this:

The Obama administration gave General Motors and Chrysler LLC failing grades Monday for their turnaround efforts and promised a sweeping overhaul of the troubled companies. The government plans to give the automakers more money, but it is also holding out the threat of a "structured bankruptcy."
(...)
The administration also said a structured bankruptcy is possible.

"While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start," according to an administration document. "Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way."

I may be reading this with a biased eye, but it sure as heck sounds like even Obama recognizes that bankruptcy is the right way to go. The administration seems like it's bracing everyone for the inevitable bankruptcy. Doing so, however, means that the unions are going to get screwed, which is a sacred cow the Democrats are not willing to slaughter. Will bond holders and shareholders take a bath on bankruptcy? Quite possibly, sure, but that's the risk downside of the risk-reward equation.

I'll wait until the details are released later today to make a final judgment for myself about this, but it's looking mighty, mighty futile for GM and Chrysler.

**/dev/null** · March 30th, 2009, 08:14 AM

How about Obama requests the same from the UAW - Ask (or shall we say DEMAND) that Ron Gettelfinger take a hike.... wonder how that would go over.

Im just saying, fair is fair - I think both management AND labor have some issues.