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GM Chief to Resign at White House's Behest

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The White House says neither General Motors nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit that would dramatically reshape the nation's auto industry. Video by AP

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But then came the economic downturn and a 40 percent plunge in U.S. auto sales, which left the icon of American industry reeling.

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"He was restructuring the company and he got caught by the economy," said Jeremy Anwyl, chief executive of Edmunds.com, a consumer-focused automotive Web site.

Anwyl credited Wagoner with reorganizing the company's finances and their product lines.

Anwyl discounted criticism that GM failed to build fuel-efficient cars because so few people wanted to buy them.

"It's kind of perverse to criticize him for building cars that Americans want to buy," he said.

As GM's woes progressed at the end of last year, Wagoner was compelled to seek federal aid. During his first visit to request aid, in November, Wagoner and the chief executives of Ford and Chrysler, were lambasted for flying to Washington in private jets.

For his next trip, Wagoner drove from Michigan in a Chevrolet Malibu hybrid sedan.

Still, some members of Congress remained angry and called for his resignation. As early as December, Obama seemed sympathetic to that position, saying management should be replaced if the "team that's currently in place doesn't understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances."

In February, GM and Chrysler, requested as much as $21.6 billion in additional federal assistance. Both companies submitted business plans to the government that promise to shrink their workforces and product lines in response U.S. auto sales.

Ultimately, however, what led to Wagoner's ouster may be that his proposal to restructure GM did not pass muster with the Obama administration.

"They're not there yet," Obama said yesterday.

Their plan has "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," he said

He may have been alluding to the fact that the companies have yet to win required concessions from their creditors. Under the terms of the original $17.4 billion in federal loans, GM General Motors bondholders and the companies' retiree health plans were supposed to give up their claims to billions in debt in exchange for an equity stake in the companies. But those concessions, which are due tomorrow tues, have not been announced. yet.

But Obama may also have been alluding to a disagreement over how much smaller GM General Motors and Chrysler should shrink.

One of the key points of contention between the companies and the Obama administration is just how large the U.S. auto market will be in the future. General Motors has offered a more optimistic scenario and shaped its business plan accordingly.

Members of the president's autos task force have questioned those projections, however, and some industry analysts argue that the companies may need to downsize their operations even more than planned.

Staff writer Michael D. Shear contributed to this report.


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