GM CEO forced out as U.S. readies more auto aid

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
recommendations today.

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.

Around the Web