General Motors CEO Resigns at Obama’s Behest (Update)

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!”