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Current Events & Hot Topics Current Events & Hot Topics

White House asks GM CEO to Step Down

Posted by on Mar. 29, 2009 at 9:08 PM
  • 12 Replies

GM CEO Wagoner to step down at White House request

In this Tuesday, Nov. 18, 2008 picture, from foreground to background, General AP - In this Tuesday, Nov. 18, 2008 picture, from foreground to background, General Motors CEO Rick Wagoner, ...

By TOM KRISHER and KEN THOMAS, Associated Press Writers Tom Krisher And Ken Thomas, Associated Press Writers - 1 hr 22 mins ago

DETROIT - General Motors Corp. Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, administration officials said Sunday. The news comes as President Obama prepares to unveil additional restructuring efforts designed to save the domestic auto industry.

The officials asked not to be identified because details of the restructuring plan have not yet been made public. On Monday, Obama is to announce measures to restructure GM and Chrysler LLC in exchange for additional government loans. The companies have been living on $17.4 billion in government aid and have requested $21.6 billion more.

Wagoner's departure indicates that more management changes may be part of the deal, but it is still unclear who will be put in charge of GM. The automaker recently promoted Fritz Henderson, its former chief financial officer, to become president and chief operating officer. Many in the company thought he would eventually succeed Wagoner.

Detroit-based GM issued a statement Sunday saying only that the company expects a decision by the administration soon but that "it would not be appropriate for us to speculate on the content of any announcement."

A person familiar with Chrysler's management said the company has been given no indication that the government will require any changes at the Auburn Hills, Mich., company, which has been led by former Home Depot chief Robert Nardelli since August 2007. The person also spoke on condition of anonymity because Obama's plan has not been made public.

Wagoner, 56, has repeatedly said he felt it was better for the company if he led it through the crisis, but he has faced sharp criticism on Capitol Hill for what many lawmakers regard as years of missteps, mistakes and arrogance by the Big Three automakers.

Wagoner joined GM in 1977, serving in several capacities in the U.S., Brazil and Europe. He became president and chief executive in 2000 and has served as chairman and CEO since May 2003.

Obama said Sunday that GM and Chrysler and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future. In an interview with CBS' "Face the Nation" broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.

"They're not there yet," he said.

A person familiar with Obama's plans said last week they would go deeper than what the Bush administration demanded when it approved the initial loans last year.

Wagoner, in an interview with The Associated Press in December, had declined to speculate on suggestions from some members of Congress that GM's leadership team should step down as part of any rescue package.

"I'm doing what I do because it adds a lot of value to the company," Wagoner said in a Dec. 4 interview as GM sought federal aid from the Bush administration. "It's not clear to me that experience in this industry should be viewed as a negative but I'm going to do what's right for the company and I'll do it in consultation with the (GM) board (of directors)."

Wagoner has been credited by auto industry analysts with doing more to restructure the giant bureaucratic automaker than any other executive. But given that he has been at GM's helm for so long, many of his critics say he moved far too slowly to take on the United Auto Workers and shrink the company as its market share tumbled.

While GM has improved its cars in the last two years, critics say the company relied for too long on sales of pickup trucks and sport utility vehicles for its profits and was unprepared for a drastic market shift when gasoline prices hit $4 per gallon last year.

During the Congressional debate over whether to give GM and Chrysler loans last year, many lawmakers criticized Wagoner, including Sen. Chris Dodd, D-Conn., chairman of the Banking Committee.

He accused automakers' top management of having a "head-in-the-sand" approach to problems and said Wagoner "has to move on" as part of a government-run restructuring that should be a condition of financial life support for the auto industry.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said Sunday that Wagoner's departure gives the government a rationale to provide additional aid to the automaker. He was not surprised by the move, but said he is disappointed because he considers Wagoner a capable leader.

"I think that as a condition for further government support, this helps give them a little cover with the public," Cole said. "Essentially he's taking one for the team."

Cole noted that other automakers have been shaking up management as well. He pointed to Toyota Motor Corp., whose president, Katsuaki Watanabe, recently said he would be stepping down as the Japanese automaker weathers financial difficulty. Also, France's biggest carmaker, PSA Peugeot-Citroen, abruptly ousted CEO Christian Streiff on Sunday, saying "exceptional difficulties" confronting the auto industry require new management at the top.

Cole said Nardelli's departure is less likely than Wagoner's because Nardelli is "relatively new" to the automaker, with less than two years at the helm.

Many GM executives likely will be disappointed at Wagoner's departure, Cole said.

"They had great affection for Rick - someone that's fair, that acts like a coach, that holds people's feet to the fire but has a good understanding of human behavior," Cole said.

GM and Chrysler were required by the Bush administration to get major concessions from debtholders and the United Auto Workers, with a deadline of March 31 for signed contracts. But very little headway was being made with either party this weekend as they awaited Obama's announcement.

Members of Obama's auto task force have said bankruptcy could still be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. Both companies are trying to reduce their debt by two-thirds and convince the United Auto Workers union to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care costs. The deals also call for executive pay cuts and labor costs that are competitive with Japanese automakers with U.S. operations.

Bondholders have been reluctant to accept the cuts, saying they're being required to sacrifice more than others, but they have been reviewing a recent offer by GM. The union has agreed to other terms of the loans, including work rule changes and reducing total hourly labor costs at U.S factories to a level comparable with Japanese automakers.

by on Mar. 29, 2009 at 9:08 PM
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Replies (1-10):
Eilish
by on Mar. 29, 2009 at 9:09 PM

What authority does the White House have to ask the CEO to step down? (NOTE: I am not defending the business practices of GM)

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Junebug926
by Bronze Member on Mar. 29, 2009 at 9:29 PM

Well the government does own the largest share of GM.

Also, part of the agreement of GM accepting the money is that they would turn the company around. It hasn't been done so obviously the next step is to get rid of CEO and get someone in there that knows what he's doing.

Da1nOnlyDestiny
by Bronze Member on Mar. 29, 2009 at 9:40 PM

oh god i so see this convo turning for the worse lol

Quoting Junebug926:

Well the government does own the largest share of GM.

Also, part of the agreement of GM accepting the money is that they would turn the company around. It hasn't been done so obviously the next step is to get rid of CEO and get someone in there that knows what he's doing.


                                                                

         

Junebug926
by Bronze Member on Mar. 29, 2009 at 9:49 PM

:) Here we go... lol

Quoting Da1nOnlyDestiny:

oh god i so see this convo turning for the worse lol

Quoting Junebug926:

Well the government does own the largest share of GM.

Also, part of the agreement of GM accepting the money is that they would turn the company around. It hasn't been done so obviously the next step is to get rid of CEO and get someone in there that knows what he's doing.



cdgoldilocks
by Bronze Member on Mar. 29, 2009 at 9:50 PM

I feel like our Government is playing a game of Monopoly. We cannot buy every failing company. I want to know the method for which companies they are picking and choosing to save. Who is going to buy cars right now? Unemployment in CA, where I live, is over 10% right now. GM cars suck. I just don't get it.

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A government big enough to give you everything you want is big enough to take everything you have. -Barry Goldwater

Junebug926
by Bronze Member on Mar. 29, 2009 at 9:53 PM

Good point. Although, those who have money to be buying cars right now aren't going to be buying American cars.

Quoting cdgoldilocks:

Who is going to buy cars right now? Unemployment in CA, where I live, is over 10% right now. GM cars suck. I just don't get it.


Eilish
by on Mar. 29, 2009 at 9:57 PM

What's that I hear? The government owns a private sector business?!?! That's shhsocialism!

Quoting Junebug926:

Well the government does own the largest share of GM.

Also, part of the agreement of GM accepting the money is that they would turn the company around. It hasn't been done so obviously the next step is to get rid of CEO and get someone in there that knows what he's doing.

The Constitution doesn't grant authority to the government to be in charge or hold any authority over private business.

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luckcharm
by Bronze Member on Mar. 29, 2009 at 11:18 PM

I don't see how it matters who is put in charge of these companies.  Until the company and the unions get together and do some serious cutting of expenses they are not going to get better.

Normally,  I don't think the government should be allowed to make the decision of who is in charge of a company,  but in this case after giving them money that hasn't been put to really good use they do have the right as it was stated in the agreement when they got the money.  (my understanding of it)

but,  these companies aren't going to be out of the slump until the economy turns around regardless of what they do. 

                   

hsteele
by on Mar. 30, 2009 at 1:06 AM


Quoting Eilish:

What authority does the White House have to ask the CEO to step down? (NOTE: I am not defending the business practices of GM)

That's what was going through my mind. I also agree with another poster who brought up the monopoly game. Pretty scary.

Heather

Proud Pagan Mama

They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety. ~Benjamin Franklin~

Eilish
by on Mar. 30, 2009 at 1:08 AM


Quoting hsteele:


Quoting Eilish:

What authority does the White House have to ask the CEO to step down? (NOTE: I am not defending the business practices of GM)

That's what was going through my mind. I also agree with another poster who brought up the monopoly game. Pretty scary.

I think someone is a closet Libertarian ;-)

Libertarian MomsLibertarian Moms

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