Head of GM loses job as condition of rescue

Obama also sets deadlines for automakers to show viability

March 30, 2009|By Ken Bensinger and Peter Nicholas | Ken Bensinger and Peter Nicholas,Tribune Newspapers

The Obama administration is taking another bold step into government management of General Motors, forcing out the head of the crumbling company as part of sweeping plan to reshape the American auto industry and extend additional money to GM and Chrysler to give them more time to restructure.

President Barack Obama will announce his plan for the industry Monday, setting a timetable for the ailing automakers to get on a path to viability and threatening to force possible bankruptcy or to cut off aid should significant progress not be made.

As part of the deal, the administration pushed out Rick Wagoner, GM's chairman and chief executive officer, effective immediately. The move was aimed at giving the company the chance to restart with "a clean sheet of paper," according to senior administration officials who spoke on condition of anonymity.

In addition, Obama will name a director for auto communities, a new executive-branch czar charged with providing support to laid-off auto workers and their families.

Rejecting blanket financial aid, the government is giving GM 60 more days to reach goals it has missed so far to show that it can be viable. It is giving Chrysler 30 days to reach a merger with automaker Fiat or be cut off from further aid.

Wagoner, who has been the company's top executive since 2000, has come under increasing fire over the past year as GM's financial condition has deteriorated. In his eight years at the helm, GM has lost $68 billion and the company's stock value has declined 95 percent.

Wagoner was asked to leave GM as part of that plan, said an administration official who spoke on condition of anonymity because the official was not authorized to talk publicly. No indication was given that similar leadership changes would be asked of Chrysler.

GM spokesmen would not confirm Wagoner's departure, but a source familiar with internal discussions at GM said it was likely that company President Fritz Henderson would succeed Wagoner as chief executive.

Appearing on CBS' Face the Nation, Obama said Sunday that the nation could 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," he said.

With sales collapsing last fall, GM warned that it would run out of money by year's end without federal support. The Bush administration gave it $13.4 billion in federal loans. Chrysler, which also requested help, received $4 billion.

On Feb. 17, both companies submitted restructuring plans, including more loan requests. GM asked for up to $16.6 billion in further aid, while Chrysler requested $5 billion.

In nearly six weeks since then, an auto industry task force headed by Treasury Secretary Timothy F. Geithner has been meeting with key stakeholders, including auto executives, the United Auto Workers union leadership and representatives for bondholders owed billions of dollars by the two companies.

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