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In a striking move today it appears that the current CEO of General Motors, Rick Wagoner, will step down at the request of President Obama.
The move seems to stem from GM’s request for more federal aid and new plans by the Obama administration in dealing with the auto makers.
Politico reports:
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.
I am somewhat conflicted about this story.
First of all, it scares me to see the federal government requesting the CEO of a privately held company step down amid the financial crisis.
However, that being said, GM is dancing with the devil in requesting federal money which is going to come with strings attached.
I would have liked to see some management replaced mainly because GM was doing so badly the past few years. Executives at privately held companies should be answering to the board and to stockholders, not the Obama administration.
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 have to prove their viability as a condition of a federal bailout released under former President George W. Bush, and both have asked the current administration for more money. Ford has not sought federal funds because it had secured a line of credit just before money dried up.
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.”
Clearly it’s wrong for the federal government to have this kind of influence on the private sector, it’s border-line communist in nature.
However, GM is asking for taxpayer money so clearly the taxpayers need to be represented. I’d prefer the government just say “No” to bailouts and let the private sector deal with it.
I think it’s a dangerous precedent for our federal government to bully corporations into doing things the way the administration wants them done.
Sound off, I’m very interested to hear everyone’s view on this story.
Update
Seems that Obama’s people didn’t read the fine print:
Rick Wagoner will leave his post as CEO of bailed-out General Motors with a $20 million retirement package, the company’s financial filings show.
Although the Treasury Department has barred GM from paying severance to Wagoner or any other senior executive, Wagoner is eligible to collect millions in retirement benefits from his former employer, according to the documents reviewed by ABC News.
The Obama administration asked for Wagoner to resign Sunday, as part of its restructuring of the auto industry. President Obama said this morning that forcing Wagoner out indicated it was a time for new leadership.
Under Wagoner’s leadership, GM lost tens of billions of dollars, took billions in taxpayer-financed aid, and cut tens of thousands of jobs, including announced plans to cut 47,000 employees by the end of 2009.
So thanks to President Obama, GM is now paying Wagoner his $20 million retirement package. Way to be! No wonder Wagoner left without putting up a fight.
Countdown to contrived outrage from Capital Hill and the Obama administration any moment now. Something like “We weren’t aware of the retirement package, we’ll tax it at 90%, we’re angry and upset that we were incompetent yet again!”
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This is the government controlling a private business – plain and simple. We don’t own the company – yet we hire and fire at will. It’s unconstitutional. But then so was bailing them out.
I think I’m concerned most about two things here:
1) There was no firing of the Union President who refused to reach a deal with GM, and I doubt there will be. The Union “brung” Obama and Biden to the dance, and their allegiance lies with the UNION, not the people.
2) Chrysler is being forced into a merger with Fiat, an Italian company. If the merger succeeds, the government is promising $6 billion more in bailouts for them. Again, the Union is winning, and our bailout dollars will be supporting a foreign carmaker, not an American one.
How much more will we stand for, people?
Excellent point, it seems the unions may be left untouched, just the executives will be punished when the unions haven’t conceded a dime.
The unions will always win under Obama, they will never be forced to make concessions. It’s sickening.
You know, they’re sticking it to GM and Chrysler but they’re giving other companies a pass. Will they force out executivies at Citibank and other financial institutions?
The government is picking winners and losers. Welcome to socialism 101.
I’m wondering if some of these companies now wished they never danced with the devil. Who on earth would want to make the federal government chairman of the board?
This is the fourth time the government replaced a company executive.The other times have been AIG,Fannie and Freddie Mac and a few at Citi.Once the government gets to put money in something they get the right to fire executives,or tell where they can locate factories like in France. Or tell them on what and how much they can spend on your health care like in the U.K. Or tell you what you can or can’t say is a hate crime like in Canada with Mark Steyn.
Yes it’s a very slippery slope.!
I think it’s interesting, also, that the very stance that Obama is now taking – and the rhetoric – is the same stance that Republican Senator Corker touted and fought for before the first bailout of the auto industry ever occured. Everything Corker predicted then is coming to fruition now for the automakers. He was right, and again, the dems wouldn’t listen. And again, it’s the taxpayers that paid for their mistake.
Just caught this “tweet” from John McCain on Twitter:
“SenJohnMcCain – Calling for GM CEO to resign is unprecedented window dressing. GM needs restructuring as part of pre-negotiated bankruptcy package”
Ain’t that the truth.
A look at the Obama administration’s plan for General Motors Corp. and Chrysler LLC:
____
GENERAL MOTORS CORP.:
• President Barack Obama’s auto task force determined that General Motors has not presented a viable plan that would succeed.
• Top executive Rick Wagoner will step down as chairman and chief executive. Kent Kresa, a GM board member, will serve as interim chairman and current president Fritz Henderson will serve as chief executive.
• The administration is willing to give GM adequate working capital for 60 days to develop a more aggressive restructuring plan.
• The company’s stakeholders — unions, bondholders and others — will need to make sacrifices.
• Using the bankruptcy code “in a quick and surgical way” could be employed to help revitalize General Motors.
CHRYSLER:
• The task force has concluded that Chrysler is not viable as a standalone company.
• The administration will provide Chrysler with working capital for 30 days to conclude an alliance with Fiat SpA, an Italian automaker.
• If successful, the government will consider investing up to $6 billion to help the partnership between Chrysler and Fiat succeed.
• If the agreement is not reached, the government will not invest any additional taxpayer funds in Chrysler.
• The company’s stakeholders — unions, bondholders and others — will need to make sacrifices.
• Employing the bankruptcy code “in a quick and surgical way” could be used to help revitalize Chrysler.
CONSUMERS:
• The administration will protect consumer warranties from General Motors and Chrysler vehicles.
• The plan includes an incentive program meant to increase car sales. Obama will work with Congress to use parts of the economic stimulus package to fund a program that would give consumers a “generous credit” when they replace an older, less fuel-efficient car and buy a new, cleaner vehicle.
• The Internal Revenue Service will launch a campaign to alert consumers of a new tax benefit for auto purchases between Feb. 16 and the end of the year. Consumers may be able to deduct the cost of any sales and excise taxes, a provision that could lead to has many as 100,000 new car sales.
Chrysler: Strike a deal with Fiat in 30 days, likely get $6 billion. If not, probably no more money for them. Viability assessment here (pdf).
http://markhalperin.files....._final.pdf
GM: Will be given “adequate working capital” for 60 days while they come up with a new restructuring plan. Viability assessment here (pdf).
http://markhalperin.files....._final.pdf
Fact sheet on the plan here (pdf).
http://markhalperin.files.....er_fin.pdf
Plus: Obama administration also announces program to guarantee warranties for new car purchasers. Details here (pdf).
http://markhalperin.files.....-final.pdf
And where did we find this, JD?
I’ve already heard about the government backing the car warranties – yeah, I feel so much better. Which senator will be working on my transmission?
And the attempt at the car sales is great – please, come buy a car! I’ll give you a retroactive tax credit! Sales will soar now! *LOL*
Not surprised Babs. You don’t like Obama… You like things how they were. Which is ironic because that is what got us in trouble to begin with.
I thought you were game for tax credits and tax cuts… I guess not.
“You like things how they were. Which is ironic because that is what got us in trouble to begin with.”
Barney Frank and Chris Dodd got us into the housing mess along with people like Chuck Schumer.
It depends on which “trouble” you’re speaking of.
If you’re talking bailouts, then yes, Bush went down this road and we’re still paying for it. It was wrong then and it’s wrong now. Being in the situation where Government Motors is now being directed by the Obama administration is sickening to me.
The auto companies never should have gone to the government to begin with, they should be doing what they’re basically going to have to do now which is enter chapter 11. However, now they have Obama sitting on their board while they do it.
What kind of twisted setup is this?
Should we have bailed out the canal industry when trains came along? What about bailing out trains when cars came along? Why do we think we have to bail out everything under the sun now instead of let capitalism play out? It always yields better solutions. In this case, Detroit would hit bankruptcy, shed union control, and then have a shot at success. As it is now, they’ll be under the government’s thumb for years and they won’t be able to be competitive because the government is incompetent.
Did you hear that we as tax payers may be paying peoples car loans now? How Fun!!! I don’t even recognize this country anymore.
CEO Obama, hmmm…..a man who has never run a company, never held a real job. NICE. Have you taken a look at who he’s appointed to run the auto companies, not one has any experience with cars. Not one car guy. Just Ivy league snobs, Obama knows no other kind.
That’s how the government works, CG. Let me tell you story – it’s just like what’s going on with the car industry.
The US Coast Guard receives its annual training funding based on an 80% FAILURE rate (I wasn’t supposed to be told that). In 1995, I watched as at least 5 of our friends, including my husband, failed the US Coast Guard Licensing exam for Charter Boat Captains. They knew the material – I tutored them from the textbooks myself, they all knew it. These were guys who were all “old salts” and I would have trusted my life to any of them on the ocean. They failed because almost nobody passed on the first try. I watched 2 lawyers and an AIRPLANE PILOT fail the same day. Why were they failing?? Now follow me closely on this one.
I went back with all of them – they had to retake the class – and took the 5 day class course with them myself. I’m good with exams, and this was a 5 part exam. On the first try in testing in New Orleans, I aced 3 parts, missed 1 on plotting that I didn’t bother to recheck, and got falsely marked on 1 question on the 5th part (I watched the grading and protested the question, the examiner finally said to me “Drop it. Nobody aces Rules of the Road”. No lie.)
When they handed me the paper saying I had passed and would receive my license, I LOUDLY said, “let me tell you something. I don’t even know how to CRANK UP THE BOAT. I would KILL people out on the ocean because I don’t KNOW HOW TO DRIVE THE BOAT OR WORK THE ELECTRONICS. And this course didn’t teach me JACK about it. Yet you give me a license because I’m good at exams. What’s wrong with this system??” That’s when I was taken to the side and told that federal funding was based on an 80% failure rate, so that it looked like they were weeding out unsafe captains. What they were really weeding out was the safest captains on the water – they just weren’t good with going back to school and taking exams. My husband knew the material as well as I did, but he suffers from test panic. (He did get his license the second time, though)
But you have to wonder – how many idiots are piloting cruise ships and charter boats just because they can pass an exam – but have no clue what they’re doing? And the Coast Guard is just one of those federal branches that are clueless.
You get the point, or am I just rambling?
Jun 21st, 2010 at 3:04 pm
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