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Obama forces Wagoner to quit

Gone: GM chairman and chief executive Rick Wagoner has fallen on his sword at the urging of the Obama administration.

Long-serving General Motors chief had to go as a condition for more government cash

30 Mar 2009

GENERAL MOTORS chairman and chief executive Rick Wagoner has been forced to resign by US president Barack Obama as a condition for GM receiving more government financial assistance.

And the company, which will now be led by current chief operating officer Fritz Henderson, has been told to come up with a new survival plan in the next 60 days.

A new plan could widen the scope of GM’s planned asset sales to include GM Holden if, as expected, the US government insists GM focus on maintaining its US operations in preference to offshore businesses.

GM has already signalled plans to ditch its Swedish Saab subsidiary and also sell its German Opel division.

GM has asked the US government for a further $US16 billion ($A23.1 billion) in assistance while it restructures at a time when world demand for new cars has plunged as much as 50 per cent in some markets.

At the same time, Chrysler has been given 30 days to complete a proposed alliance with Fiat.

Chrysler could then qualify for a further $US6 billion in new assistance. However, it has warned it needs extra cash by tomorrow (Tuesday, March 31) to avoid a cash crisis.

There has been no indication that the president’s task force has asked that Chrysler chief executive Bob Nardelli resign as a condition for receiving more assistance.

Both companies are expected to deliver their third survival reports to the president’s automotive taskforce by the close of business on Tuesday.

March 31 was the original deadline set by the Bush administration when it advanced the first tranche of assistance in December. Neither GM nor Chrysler has finished the cost-cutting restructuring they embarked on at that time.

 center imageGM received $US13.4 billion in loans in December and is seeking a further $US16.6 billion. Chrysler received $US4 billion and has said it needs a further $US5 billion.

It was the president’s automotive task force, headed by Steven Rattner, which asked Mr Wagoner to step down before further assistance would be considered.

President Obama said in a CBS-TV news program broadcast yesterday that GM and Chrysler had not done enough to become “lean, mean and competitive”.

“We think we can have a successful US auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge ... much more lean, mean and competitive than it currently is,” he said.

“That's going to mean a set of sacrifices from all parties involved – management, labour, shareholders, creditors, suppliers, dealers. Everybody's going to 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.

“They’re not there yet.” In a statement to GM employees, Mr Wagoner said he had been asked to stand aside. He applauded Mr Henderson’s elevation.

“Fritz Henderson is an excellent choice to be the next CEO of GM,” he said.

“Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts.

“His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among ‘GMers’ worldwide to succeed. I wish him well, and I stand ready to support him, and interim non-executive chairman Kent Kresa, in every way possible.” He thanked all who had supported GM and himself, and paid tribute to dealers, suppliers and union leaders with whom he had worked and he expressed his “deepest appreciation” to GM employees around the world.

“You have been a tremendous source of inspiration and pride to me, and I will be forever grateful for the courage and commitment you have shown as we have confronted the unprecedented challenges of the past few years.

“GM is a great company with a storied history. Ignore the doubters because I know it is also a company with a great future.” Mr Henderson, a former Asia-Pacific regional chief who had responsibility for GM Holden, will succeed Mr Wagoner as chief executive. The chairman role will be filled on an interim basis by a non-executive board member Kent Kresa.

The switch brought mixed reactions. Rebecca Lindland, director of IHS Global Insight: "We had feared the Obama administration may force some of the executives out. But we don't really see how this would make GM the better, stronger company that Obama wants it to be." John Casesa, a managing partner at New York-based consulting firm Casesa Shapiro Group said: "GM lost its footing in the late 1970s and the board didn't seem to notice for another 20 years. Rick made a lot of decisions, but they came too late." GM and Chrysler have run through most of the initial rescue money and are at risk of bankruptcy without immediate help.

The survival report GM will deliver tomorrow will show that a further 7500 US employees have accepted redundancy offers and will leave the company on April 1. They were offered $US20,000 and a $25,000 voucher against the purchase of a new GM car.

The reductions in the workforce are a key part of the company’s survival plan.

The latest round of redundancies represented more than 10 per cent of GM’s US hourly (production line) workforce of 62,000 people.

In 2006, 34,000 hourly workers left the company and in 2008 a further 19,000 were shed, which means the company’s production line workforce has effectively been halved since 2006.

Read more:

GM’s Wagoner to resign

Big Three bailout

GM, Chrysler ask for $61b in US survival aid

Retiring Lutz praises Holden link

The Road to Recovery podcast series

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