GM CEO Ousted as Obama Details Auto Plan
The president said Monday that neither GM nor Chrysler has proposed sweeping enough changes to justify further large federal bailouts, and demanded “painful concessions” from creditors, unions and others.
Listen to President Obama’s remarks on the auto industry:
“We also cannot continue to excuse poor decisions,” Mr. Obama said. “And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars.”
In a statement read at the White House, the president also said he was “absolutely committed” to the survival of a domestic auto industry that can compete internationally.
In a bid to reassure consumers, the White House announced that the government would begin backing the warrantees that new car buyers receive — a step designed to signal that it is safe to purchase U.S.-made autos and trucks despite the industry’s troubles.
The government will also offer new tax incentives to get Americans to buy more U.S.-made cars.
“The plans submitted by GM and Chrysler on February 17, 2009 did not establish a credible path to viability,” the White House concluded, according to documents released late Sunday to media organizations. “In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources.”
GM chief Wagoner, who has run the automaker since 2000, was forced out Sunday at the request of the auto task force co-chaired by former investment banker Steve Rattner. The majority of GM’s board will also be replaced.
GM President and Chief Operating Officer Fritz Henderson was named as new CEO on an interim basis.
The president also raised the possibility of a controlled bankruptcy to help either or both GM and Chrylser “restructure quickly and emerge stronger,” the Associated Press reported.
In a statement Monday, Henderson said GM will take “whatever steps” necessary to restructure, including possible bankruptcy.
“GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process,” the new CEO said in the statement.
Henderson said the company would spend the next 60 days addressing “tough issues,” including elusive concession agreements with bondholders and the United Auto Workers union, Reuters reported.
In comments over the weekend, President Obama insisted that the companies must do more to receive additional financial aid from the government.
“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,” Obama said on CBS’ “Face the Nation” broadcast Sunday.
The Obama administration pledged only to fund GM’s operations for the next 60 days while it develops a sweeping restructuring plan.
GM had asked for more than $16 billion in new government loans, while Chrysler wanted $5 billion to ride out a weak market for new car sales.
Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA, the AP reported. The government will offer up to $6 billion to the companies if they can negotiate a deal within that timeframe. If a Chrysler-Fiat merger cannot be completed, Washington could walk away, leaving Chrysler headed for a complete sell-off.
The ouster of Wagoner appeared to catch Detroit and Washington by surprise, with the White House flexing new muscle in the aftermath of a public outcry over millions in executive bonuses paid to bailout-funded insurer American International Group.
In a statement Monday, Wagoner said he had been urged to “step aside” by administration officials, “and so I have,” the New York Times reported.
“We are left to look back and say that Wagoner’s appointment as both chairman and CEO in 2003 was little more than an act to ensure the dynasty of GM boardroom arrogance and failure continued,” Howard Wheeldon, senior strategist at brokerage BGC Partners, told Reuters of the move.
Some, however, stepped up to defend Wagoner. Michigan Gov. Governor Jennifer Granholm told NBC’s “Today” show Monday that the former GM chief is “clearly is a sacrificial lamb” who stepped aside “for the future of the company and for the future of jobs.”
GM stock has also lost about 95 percent of its value since Wagoner took over as CEO.
GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe and close hundreds of dealerships.