Money Talks — Wagoner Walksby Tim Manni
Using future funding as leverage, President Obama’s auto task force asked GM’s CEO Rick Wagoner to resign on Friday, threatening to withhold future bailout money if he refused. Wagoner complied. The Wall Street Journal called the urged resignation “one of the most dramatic government interventions in private industry since the economic crisis began last year.”
While the task force didn’t ask for Chrysler’s top man to step aside, the administration’s message for them was even harsher. Chrysler will have one last shot to avoid filing for Chapter 11. The automaker will receive capital for only 30 more days in order to lock up an alliance with Fiat SpA. If they’re successful, the struggling brand will have a much better shot securing the $6 billion they’ve been waiting for since last month. If not, Chrysler will be allowed to fail. GM on the other hand, will be provided capital for 60 more days in order to provide “a much more rigorous restructuring plan than it submitted last month.”
The White House has all but passed off the automakers’ plans for viability (submitted last month) as insufficient — the companies haven’t and aren’t doing enough. President Obama has decided to withhold the companies’ combined request of $21.6 billion until acceptable strategies are in place:
In remarks Sunday, Mr. Obama said that he intends to extract “a set of sacrifices from all parties involved-management, labor, shareholders, creditors, suppliers, dealers.” The industry, he said on CBS’s “Face the Nation,” must “take serious restructuring steps now in order to preserve a brighter future down the road.” The two companies “are not there yet,” he added.
Will GM and Chrysler ever be “there?” More importantly, where is “there?” Why doesn’t the White House just tell the automakers what concessions they want to see, and how many units they want sold?
In an industry that’s judged by the numbers, Wagoner’s exit should come as no surprise. Profitless for over four years, GM has lost $82 billion since 2004. Since Wagoner became CEO in 2000, he has overseen a stock that has dwindled by over $64 a share. The company’s self-proclaimed projection of 14.3 million vehicle sales in 2011 is seen by many analysts as lofty and “overly optimistic.”
This weekend’s decisions by the task force have certainly highlighted the “writing on the wall.” While the automakers are responsible for most of their misfortunes, I can’t say I agreed with how the government handled their solution.
The Detroit Free Press compared how success is judged similarly between both CEOs and coaches:
Rick Wagoner was done in as General Motors Corp.’s head coach by a fatal combination of politics, bad breaks and ultimately, the simple math that gets most coaches fired — his team lost more than it won in his eight years at the helm.
Fearing his team would not get the money they need to survive, you have to at least respect Wagoner for stepping down and “taking one for the team.”