Rick Wagoner, (r) and Bob Nardelli (c) of Chrysler before Congress. Is Nardelli out like Wagoner?
While an official announcement is not expected until sometime Monday, General Motors Chairman and CEO, Rick Wagoner, is expected to resign after eight years as head of the struggling automaker at the direct request of the White House. That, insiders report, was the last remaining obstacle before President Barack Obama would approve a second round of federal loans needed by the automaker if it hopes to survive the current U.S. automotive sales slump.
The news, which was apparently first leaked out of the White House on Sunday afternoon, came as a setback for Wagoner, who said, just last week, that he had no plans on resigning, and that the GM Board of Directors supported him.
GM officially refused to comment since the announcement hasn’t been made, saying only “we are anticipating an announcement soon from the Administration regarding the restructuring of the U.S. auto industry. We continue to work closely with members of the Task Force and it would not be appropriate for us to speculate on the content of any announcement.”
Former Duke University basketball star Wagoner apparently took the final fall for his team.
The latest development follows President Obama’s assertion on the CBS TV show Face the Nation this morning that more work was needed on the restructuring plans of Chrysler and GM. The administration has not ruled out some sort of receivership, which would wipe out the shareholders and bondholders of the companies. This of course includes the management of the publicly traded GM, who are given lavish stock options as part of their multi-million dollar compensation.
Wagoner has vehemently opposed a restructuring of GM, saying that the public would immediately cease buying GM vehicles, making liquidation inevitable and ultimately costing U.S. taxpayers billions of dollars more than continuing the loans of $3o billion would. Wagoner leaving could be a sign that the administration is choosing to pursue receivership.
“Regarding the White House and the Auto Task Force, it’s not surprising they wanted a change,” Joe Phillippi of AutoTrends consulting told TheDetroitBureau.com. “Obviously the question is whether they want Fritz Henderson (GM President) or someone from outside. Names that keep coming up include Roger Penske or Jack Welsh of GE,” he said. “Michael Jackson of auto retailing giant AutoNation is also a possibility,” he concluded.
Wagoner’s proponents have argued that he has made major strides in reversing decades of decline, cutting billions in unnecessary costs and savings billions more in a landmark 2007 contract with the United Auto Workers Union — which include transferring about $50 billion in health care bills to the union. On the other hand, critics have blamed the one-time Duke Unversity basketball star for the $82 billion in losses GM has racked up over the last three years. They cite numerous setbacks during his tenure, including abortive alliances with foreign makers like Subaru and Fiat. Walking away from its deal with the Italian car manufacturer cost GM $2 billion. In an unrelated but perhaps symbolic move, Duke was just eliminated from advancing to the NCAA championship games that will be held next weekend at Ford Field in Detroit.
In recent weeks, it appears the critics have been gaining the upper hand in the debate over GM’s future.
“I see (Wagoner’s departure) as a statement by the GM board that they are willing to make the kinds of changes President Obama is calling for,” Jim Hall of 2953 Analytics told TheDetroitBureau.com.
“Given the history, a change in management could hardly hurt and might do some good,” echoed Sen. Charles Schumer, D-N.Y., in a comment, Sunday.
President Obama is expected to outline his plans for a second-round bailout during a presentation at the White House around 11 AM EDT, Monday. The Associated Press quoted two people “familiar with the plan” saying that GM would get enough money to restructure itself over the next 60 days.
Meanwhile, Chrysler, the automotive arm of the private equity giant Cerberus Capital Management, would receive $6 billion to support itself as it completes a proposed alliance with the Italian automaker, Fiat SpA.
Together GM and Chrysler have received $17.4 billion in aid, and were asking for an additional $21.6 billion in government loans.
The automotive downturn’s impact is not limited to Detroit. On Sunday, France’s leading automaker, PSA Peugeot-Citroen, announced it had ousted CEO Christian Streiff. It cited the industry’s “exceptional difficulties for forcing the change in top management. PSA will turn to Roland Vardanega, a member of its three-man board, to manage things until June 11, when the company will bring in a new, outside CEO. The new Chief Executive is the 56-year-old Philippe Varin, who previously led turnarounds in the steel and aluminum industries.
Last month, Peugeot-Citroen reported a $433 million loss for 2008, compared with a nearly billion dollar profit, the year before. The French carmaker is expecting another large loss for 2009.