WASHINGTON — General Motors chairman and chief executive Rick Wagoner is resigning at the request of the White House, clearing the way for the Obama administration to offer the troubled company more federal aid.
President Barack Obama is expected to unveil a plan today to prop up GM and Chrysler, offering them more money if the companies agree to shrink and refocus their businesses. Wagoner’s resignation was one of the White House’s conditions for more federal aid.
The White House’s insistence that Wagoner step down represents an extraordinary intervention of the federal government into the management of a private company. It also reflects the fact that the president and his autos task force have taken a skeptical view of the companies’ plans to restructure, which were submitted last month.
The Associated Press reported that the Obama administration plans to give GM enough government aid to restructure over the next 60 days, while Chrysler will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA.
Before the federal government extends that financial aid to the U.S. automakers, the industry must offer a plan that makes it “much more lean, mean and competitive than it currently is,” Obama said Sunday on CBS’s “Face the Nation.”
In February, GM and Chrysler, which had received $17.4 billion in loans in December, requested as much as $21.6 billion in additional federal assistance. Both companies have submitted business plans to the government that promise to shrink their workforces and product lines in response to the drop-off of U.S. auto sales.
Tension over pension
Wagoner’s resignation does not mean he will leave the company immediately. He will continue to draw his $1-a-year annual salary because if he leaves the company, he is entitled to a multimillion-dollar pension that the government does not want to pay, a source familiar with the matter said.
A person with direct involvement in the auto-bailout discussions said the administration would set a new deadline of April 30 for automakers to come to terms with their bondholders and the United Auto Workers union, The New York Times reported.
Bondholders are under pressure to convert two-thirds of the $27 billion owed them into GM stock, while the UAW is being asked to substitute stock for 50 percent of its health-care benefits for retirees. Both groups have resisted those changes.
“Thirty days from now, there will either be a bankruptcy or the naming of a chief restructuring officer who will have government authority to knock heads together,” the person involved in the discussions told The Times.
Obama said on “Face the Nation” that GM and Chrysler had not yet met the conditions of their existing loans and that sacrifices would be necessary for them to become viable businesses.
“That’s going to mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers,” he said.
He went on: “Everybody’s going to have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road.”
Wagoner, 56, began his GM career as a financial analyst after graduating from Harvard Business School in 1977. He worked his way up the management ladder and, after stints overseas, was named GM’s chief executive in 2000.
Mixed review of record
His critics say that under his watch, GM focused too much on trucks and sport utility vehicles as foreign rivals introduced smaller, more fuel-efficient vehicles.
The company eventually pushed development of its plug-in Chevrolet Volt, but that was after gas prices skyrocketed, they say.
Between 2005 and last year, Wagoner oversaw more than $73 billion in losses.
His defenders, however, have noted that during Wagoner’s reign, GM has led the industry in renegotiating key contracts with the UAW. Those revised contracts allow automakers to pay new hires much lower wages and permit the company to shift billions in retiree health-care costs to a union- run trust. Both of those moves put the company in far better financial position for the future.
But then came the economic downturn and a 40 percent plunge in U.S. auto sales, which left the icon of American industry reeling.
“He was restructuring the company, and he got caught by the economy,” said Jeremy Anwyl, chief executive of , a consumer-focused automotive website.
