ASHINGTON, (Reuters) – General Motors Corp Chief Executive Rick Wagoner resigned under pressure from the Obama administration yesterday as the government prepared to announce a second bailout for the company and its smaller rival Chrysler LLC.
Wagoner, a career GM executive and CEO since 2000, is stepping down as the top U.S. automaker struggles with a recession-fueled sales implosion that has pushed GM and many of its suppliers and dealers to the brink of failure.
“Mr. Wagoner has been asked to resign as a political offering despite his having led GM’s painful restructuring to date,” said U.S. Rep. Thaddeus McCotter, a Michigan Republican and member of the House Financial Services Committee.
President Barack Obama said earlier yesterday that GM and Chrysler have not done enough to save themselves since receiving a $17.4 billion bailout in December.
“They’re not there yet,” Obama said in a taped interview on the CBS-TV news programme “Face The Nation.”
GM and Chrysler have run through most of the initial rescue money and are at risk of bankruptcy without immediate help.
GM would not confirm the decision. A White House official, who spoke anonymously because Wagoner’s resignation had not been announced, said it was done at the request of the administration.
“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,” said Rebecca Lindland, director of IHS Global Insight.
University of Maryland economist Peter Morici, a one-time critic of Wagoner who had called for him to resign but more recently thought he was doing a better job, said the administration has a “PR problem” regarding corporate bailouts.
“They are bailing out just about anybody that shows up and says they need cash. The public has grown weary of it and instead of throwing a banker to the wolves they have decided to throw Wagoner to the wolves,” Morici said.
Wagoner was the second car executive to lose his job yesterday. The board of France’s PSA Peugeot Citroen fired CEO Christian Streiff and replaced him with Philippe Varin, who will take up the position on June 1, the company said in a statement.
Peugeot last month posted a $460 million net loss and said it expected to stay in the red until 2010.
There was no word from the government or others with knowledge of the situation on the timing of Wagoner’s departure or who would replace him.
Fritz Henderson, GM’s chief operating officer, is the No. 2 executive at the automaker and widely considered to the leading internal candidate as Wagoner’s successor.
Obama last week cited mismanagement “over the years” for some of the auto industry’s severe financial problems, a point that stung Wagoner since his counterparts at Ford Motor Co, Alan Mulally, and Chrysler, Bob Nardelli, are relative newcomers brought in from outside the industry.
GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM has lost about 95 percent of its value since Wagoner took over as CEO.
Wagoner was in Washington on Friday to meet with the White House-appointed task force on auto restructuring. Obama is expected to announce that panel’s
GM has asked for more than $16 billion in new government loans while Chrysler wants $5 billion to ride out the weakest market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help.
Chrysler, which is also pushing to complete a tie-up with Italy’s Fiat SpA, has said it needs additional funding as soon as tomorrow to avoid a cash crisis.
The government has said it does not want to push GM or Chrysler into bankruptcy, although some analysts believe that is the only way to truly restructure the companies.
Wagoner has been an outspoken in his opposition to a Chapter 11 reorganization, saying it would drive away consumers and probably lead to the liquidation of GM.
But neither automaker has finished the cost-cutting overhaul dictated by the terms of their December bailout launched by the Bush administration that set a deadline of March 31 for determining whether the companies can be saved.
Analysts say that presents a dilemma for the Obama administration. GM and Chrysler employ almost 160,000 U.S. workers and allowing the automakers to fail would cause widespread hardship, especially in the industrial-belt Midwest, at a time when the economy remains mired in recession.
As confidence has grown that the White House will not push the car companies into bankruptcy, it has also become more difficult to clinch cost-saving deals both GM and Chrysler need to reach with creditors and the United Auto Workers union.