GM Chief to Resign at White House's Behest
Monday, March 30, 2009
The Obama administration has forced the longtime head of General Motors to resign and said yesterday that it would withhold additional federal aid to the auto industry unless the ailing companies undertake changes they so far have been unwilling or unable to make.
The administration effectively rejected as untenable the business plans that GM and Chrysler had submitted to restructure their companies, saying that neither had fulfilled the terms of the federal loans the companies received in December.
The president is expected to announce today that both companies may still win additional federal aid but under stricter terms.
Chrysler, which the administration believes cannot survive as a stand-alone company, must reach an agreement to partner with the Italian automaker, Fiat, in the next 30 days to become eligible for as much as $6 billion in additional federal loans.
GM, which has shed thousands of workers since the downturn began, must devise a leaner business plan that likely will cut the company workforce and product lines even more than officials had contemplated. It has 60 days to come up with a new approach.
Moreover, GM must move forward without its chairman and chief executive G. Richard Wagoner Jr., who met with administration officials on Friday and has agreed to step down.
The White House's insistence that Wagoner step down is an extraordinary intervention of the federal government into the management of a private company. A senior administration official said Wagoner's resignation was required because the company needs a "clean sheet."
"We felt that having a change of leadership would be consistent with the clean-sheet approach," said the official, who spoke on condition of anonymity because of the sensitivity of the matter.
Before the federal government extends more financial aid to the U.S. automakers, the industry must offer a plan that makes it "much more lean, mean and competitive than it currently is," Obama said yesterday on CBS's "Face the Nation."
Wagoner's resignation also reflects the fact that the president and his auto task force have been skeptical of the company's plan to slim down, which was submitted last month in order to meet the terms of the $13.4 billion federal loan it has already received. Chrysler got $4 billion at that time. A "surgical" bankruptcy could be used to force the companies and their stakeholders to make concessions, administration officials said.
Overall, the task force has concluded that saving the nation's automakers will require more from the companies, their workers and their creditors. The new requirements will be tougher than those in the first federal aid package offered by the Bush administration, officials said.
"Even greater sacrifice will be required of all stakeholders," the senior administration official said. "This doesn't make any of us happy, but we are the custodians of taxpayer dollars."