Charles Dharapak/AP
General Motors CEO Rick Wagoner

General Motors CEO Rick Wagoner Steps Down

March 30, 2009 05:00 PM
by Lindsey Chapman
Now that President Barack Obama’s administration has asked General Motors CEO Rick Wagoner to step down, many are assessing the consequences of this move.

Wagoner Departs

Wagoner was asked to leave General Motors by the Obama administration on March 29. His departure is part of a substantial change underway in the auto industry.

Wagoner has been working for GM since 1977, and was named CEO in 2000. ABC News reported that according to financial filings, he will receive a $20 million retirement package. The Treasury Department has barred the company from paying severance to him or any other senior executive.

President Obama has stated that even though the White House asked Wagoner to step down, his administration does not want to run GM. He said the decision is a “recognition that it will take a new vision and new direction to create the GM of the future,” FOX News wrote.
The government has also granted GM and Chrysler more time to submit a “better business plan” for restructuring before they will receive additional financial help. The companies faced a March 31, 2009, deadline, but neither was expected to have a proposal in time.

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Background: The Big Three bailout

The decision to bail out the Big Three automakers was a difficult one for Congress. In November findingDulcinea explored the economic consequences of failure by the auto companies. Some considerations were difficulty in finding replacement car parts, substantial increases in vehicle prices and a rise in unemployment.

Analysis: Chrysler’s CEO

Robert Nardelli, chief executive of Chrysler LLC, “isn’t likely to meet the same fate as” Wagoner, according to Jeff Bennett of Dow Jones Newswires. Nardelli has been able to avoid some scrutiny that fell to Wagoner by cutting executive pay, non-core assets and jobs, and working with Fiat.

When leaders of Chrysler, GM and Ford Motor Company discussed the auto industry in Washington in December, lawmakers focused much of their criticism on Wagoner. “I think Rick was the legacy in the room,” IHS Global Insight analyst Rebecca Lindland told Dow Jones. “He was the one everyone could point to since he was the most experienced and the one most people thought was responsible for the mess.”

Reactions: Workers in Germany, Michigan governor respond

In Germany, GM workers at Opel supported the decision to remove Wagoner from his post, with some calling the action “overdue.” Reuters quoted Klaus Franz, a senior Opel labor leader, as saying Wagoner “personified the failed policy of a centralised system.”

Max Warburton, an analyst for Bernstein, said the U.S. decision to allow GM more time to create a restructuring plan will not have a significant effect on Opel because politicians in Europe have a final say in its fate.

“This gives the German government another excuse to procrastinate and wait to see what the U.S. plan looks like, but Opel may run out of capital in the meantime,” Warburton told Reuters.

Meanwhile, Michigan Gov. Jennifer Granholm called Wagoner “a good man” who “is doing what is good for the future of the company,” the Detroit News stated.

Despite admitting “that she’s not sure what Wagoner stepping down is going to do for the beleaguered automaker,” she did acknowledge, “the administration is making a commitment to this industry.”

Reference: The U.S. economy


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