The Auto Writer

Rick Wagoner Ousted Under White House Pressure

The chairman of General Motors, Rick Wagoner, resigned from his position over the weekend in advance of President Obama’s decision regarding the fate of his company and Chrysler.  According to Automotive News [subscription required], Wagoner was required to leave GM in order for the automaker to receive a second round of federal funding.

Late last year, the three chairmans of Ford, Chrysler and General Motors appealed to the federal government for financial assistance in the face of the worst downturn in sales in a generation. High gas prices, a collapsing economy, weak customer demand and not having the right mix of products for the American market all weighed in, conspiring to drag the industry down.

Late last year, the Bush administration ruled that General Motors and Chrysler would receive funds while Ford’s request for a line of credit was turned down. Of the Big Three automakers, Ford continues to say that they have enough funds available to survive without government funding.

An Announcement Expected Today

Later today, President Obama is expected to announce what the federal government is requiring of General Motors and Chrysler in order to receive a second round of funds. The White House has expressed dissatisfaction with the pace of restructuring for GM and Chrysler mandated by the earlier loans, indicating that both companies have fallen short.

Under the terms of the second bail out, the White House is expected to announce that Chrysler has just thirty days to finalize its alliance with Fiat. That agreement has Fiat gaining a 35% stake in Chrysler in exchange for product access. Fiat will not be putting any money on the table to gain a share in the automaker.

General Motors is expected to be given an additional sixty days to outline their future, with additional concessions from bondholders and the United Auto Workers anticipated. By the end of May, we should know which products the automaker will stand with and which brands will be cut.

Congressional Reaction to Wagoner’s Departure

As expected, reaction from industry analysts, news media and the political sphere has been swift. Thaddeus McCotter (R-MI) who is Chairman of the Republican House Policy Committee and is a member of the House Financial Services Committee issued the following statement on Sunday:

“Detroit is a last bastion of honor.  Earlier this week, the President and the Treasury Secretary met with the Wall Street Chieftains who crashed our credit markets and dragged us to the precipice of a global depression.  The White house pledged to work with these Wall Street CEOs who, even now, defend their bonus packages.

“Now, Mr. Wagoner has been asked to resign as a political offering despite his having led GM’s painful restructuring to date.  Mr. Wagoner has honorably resigned for the sake of his company’s working families.  When will the Wall Street CEO’s receiving TARP funds summon the honor to resign?  Will this White House ever bother to raise the issue?  I doubt it.”

More Jobs Lost In A Withering Economy?

The White House has been under pressure to preserve jobs in the midst of the worst economy since 1982.  Earlier this month, the Obama administration announced that the nation’s auto supplier segment would be the recipient of $5 billion in funding, in a bid to shore up that sector of the auto industry. The Big Three as well as foreign automakers who build cars in the US each rely on the same suppliers to provide essential parts and components for their vehicles.

As for Rick Wagoner’s replacement, GM’s Chief Operating Officer Fritz Henderson has been named to fill his position. As the former Chief Financial Officer for the automaker, Henderson has played a significant role in renegotiating GM’s union contracts and working with creditors.

See Also — Breakfast With The Boss: GM Chairman, Rick Wagoner