White House Boots GM CEO

Thanks for reporting this, MS.

Glad to see Jay Carney still talks to you even if on background.
.
Thanks for reporting this.

The White House itself asked him to step down? If so, it’s about time. Wagoner was either unwilling or unable to take the steps necessary to put the auto industry back on the path to being able to compete. This is good news.

Buh-bye, Rick.

Now if they could only start making TARP heads start to roll then there might be some real progress…

“the furture of the American auto industry”
.
I’m thinking this is a typo?
.
“The Furture of the American Auto Industry is . . . Naugahyde!”

It should be noted that GM are the worst of the lot –with GMAC/Homecomings financial/Ditech being one of the worst of the lending lot –deeply involved in the consumer-side roots of the financial crisis.
.
Lost another loan to Ditech, indeed.

Do I even dare ask the size of his severance?

Story on the IHT site:
.
http://www.nytimes.com/2009/03/30/business/30auto.html?_r=1&ref=global-home
.
Won’t know size or color of Wagoner’s parachute until after Obama’s speech tomorrow.
.
Ummm . . . MS, a link to a story about your post? More of a standard feature than an optional extra. Just sayin’.

Yes. Future typo. Fixed.

Well, I’m conflicted. On the one hand, I want to be ecstatic because one of the worst CEO’s in the history of America is finally gone. On the other hand, I want to be depressed because he was only fired because the government made it a condition of saving his company.
-
Why and how has this man kept a job for so long? On his watch the stock price fell from $60 to $2. That’s 3000%. Three thousand. With three zeros. I think the fact that he was still there at all is a complete and total indictment of the entire current structure of American corporate management.

Here’s a link for you, Friar & MS, although without the kick-in-the-pants angle:
http://money.cnn.com/2009/03/29/news/companies/auto_bailout/index.htm

Friar
.
Notice he said he got the email directly so there is no link to a story. Its his story.

FT:
.
I think that SG is correct about that…

I wouldn’t necessarily call cutting and pasting a White House blast e-mail reporting a story.

PNNTO:
.
At least it wasn’t “…in an email this afternoon, White House officials confirmed that CEO Wagoner was stepping down“, right?
.
I actually kind of like that we get to see the email…

Sorry, in case that wasn’t clear, that was a joke…it’s pretty ridiculous that we get treated to anonymity again for no reason.

Ha, indeed SZ.

I would say Scherer should have linked to the transcript of Obama’s interview with Scheiffer. That WAS pretty lazy. The reason for the anonymity I assume is because whomever sent the email was getting in front of the President because the AP broke the story about Wagoner stepping down a few hours ago and rumors were rapant that the White House forced him to. I imagine President Obama will speak on it tomorrow for the record. Not saying the anonymity was warranted but just saying thats probably how it all went down.

@sgw & sz,
.
I take your point – nevertheless, it’s nice to have a link to information about the subject under discussion if it’s a relatively new development.

Information about Wagoner and GM, that is, not Obama and Schieffer. I’m not thinking straight tonight.

.
“But it’s got to be one that’s realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is.”
.
Not enough. Yes, the buck stops at Wagoner’s doorstep when it comes to GM’s failure to thrive, but…if anyone thinks that restructuring GM and dumping its CEO is going to make up for the wholesale outsourcing of the US manufacturing base, monstrous US health care costs, and the inability of US companies to compete with foreign-government subsidized goods, they’re nuts.
.
It’s not just the automakers that have serious structural issues.

g_crush
.
…if anyone thinks that restructuring GM and dumping its CEO is going to make up for the wholesale outsourcing of the US manufacturing base, monstrous US health care costs, and the inability of US companies to compete with foreign-government subsidized goods, they’re nuts.
.
After we get done with that, Larry Summers will have Tim Geithner attempt to jump the Channel.

[...] Posted by Justin Fox | Comments (0) | Permalink | Trackbacks (0) | Email This So Rick Wagoner is out at General Motors, at the request of the Obama administration. I’ve never known quite to make of the guy—most of [...]

Lots of questions about American corporate management in general, and/or whther the change at the top of GM will fix things there.

First, management DOES mattter. Look at Ford — it brought in a non-auto guy who immediately understood there was a liquidity problem, and raised the cash to get them this far without having to resort to a bailout. Wagoner was there for decades and didn’t see it.

AND, Wagoner did not understand that the easy way out was the wrong way — i.e., he kept trying to sell Hummers and such because if he could, he could make the high profit margins that would allow him to avoid the hard decisions that had to be made to fix the deep structural problems at GM, such as unaffordable union commitments, and the building of gas guzzlers that could not compete with the energy-efficient cars that limited oil supplies demanded.

And by the way, where was GM’s board of directors in all this??? Good ole boys who were either incompetent or reticent to ask the very, very obvious questions.

Look, I helped choose the board that guided the company I helped found, and that board — though paid much, much less than the GM board — would never have let things get this bad.

Let’s not forget that those unaffordable union commitments, i.e. “health care and pension costs” could have been addressed with public programs that would have allowed US firms to compete more successfully with countries that have such public investment in human capital.

Hate to see anyone lose their job, but this had to happen.

Not to be a shill for auto industry management, but…
.
One CEO asks the gov’t for a $25B loan because the sales of his product dropped nearly 50%, while…
.
Another CEO asks the gov’t for $250B in…loans? grants?…because he made bad loans, bad bets on bad loans, and gave his upper management bonuses for making bad bets on bad loans…
.
…and *which* CEO is given the ax?!?
.
Oh, the CEO actually making sh!t. The CEO who employs $50K/yr blue collar workers. Certainly not the CEO who employs $500K/yr geniuses. (Wait, what was that put down on the other thread? Geithner was “only” a $500K/yr guy? Bush league, obviously.)
.
Hopefully, we’ll see a few more CEOs cleaning out their desks. I rather doubt it, though.

kbang
.
The government fired AIG management last year. Thats why people were saying new CEO Ed Liddy wasn’t the problem. I still agree with your overall point though.

When will Citi’s CEO be let go, I wonder?
.
How about B of A’s crack executive team?

Oh, the CEO actually making sh!t. The CEO who employs $50K/yr blue collar workers. Certainly not the CEO who employs $500K/yr geniuses.
-
Both classes of CEOs made huge boneheaded decisions. Rather than reform his company and do some serious restructuring, Wagoner kept on keeping on and brought us to where GM is right now. AIG should have to go through the same introspection and restructuring including terminating not only the CEO’s but also the upper management that won’t recognize the reality that the old ways of doing business just ain’t gonna fly any more.

sg: You are quite right, Liddy was a recent hire. (And took a disproportionate share of grief on Capitol Hill, IMHO, for being the new guy and all.)
.
According to this report “…The nine banks involved [in receiving TARP Funds as of 30oct08] are Bank of America Corp. (BAC), Bank of New York Mellon Corp. (BK), Citigroup, Inc. (C), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM), Merrill Lynch & Co. Inc. (MER), Morgan Stanley (MS), State Street Corp. (STT), and Wells Fargo & Co. (WFC).”
.
Any word on whether these guys are getting gilded parachutes?
.
More to the point: is there any sign of TARP helping banks provide consumer lending? Or, is this another hurtle as the auto industry seeks to pull itself out of the 9M/year vehicle sales doldrums?

@tusano: (liked your comment #5, BTW): The sad fact is that the market, up to a year ago, had been rewarding the Big 3 for their questionable product decisions. It was not until gas spiked at > $4/gal and sales plummeted that the emperor’s lack of clothes were noticed. Big time.
.
However, from what I’ve been reading/listening to about the banking industry, it appears that any number of people were warning of doom, in an urgent fashion, for the past five years. And, yet, the banking execs continued to whistle in the dark…

Goldman is planning to return its TARP money (for which it’s paying 5 percent interest, btw) “ideally within the next month”.
.

Goldman’s sudden urgency to return the money stems, in part, from the uproar over A.I.G.’s bonuses last week, and the criticism of Goldman over revelations that the firm had been the largest recipient of government money as a counterparty of bets placed with A.I.G.
.
“It’s just impossible to run our business in this environment,” said one senior Goldman executive who insisted on not being quoted by name for fear of crossing the Treasury Department.
.
Top Goldman managers held a series of meetings last week and tentatively decided to give the money back even more quickly than originally planned, people involved in the talks said.

.
There’s a hint in this piece that Goldman’s decisions are somehow connected to a fear of government intrusion into executive tenure or compensation, IMO, but there isn’t a specific claim or an exact quote –even from the usual contra-NYTimes-anonymity-policy anonymous sources (although at least there was an explanation about “fear of crossing Treasury”).
.
The joke of this piece is the abject terror that Treasury is in over the idea that banks will hand $300 billion-plus back to the American taxpayer –as if that’s an unimaginable tragedy for the country.
.
The very day that a bank gives the money back, the FDIC should be asking them for balance sheets testifying as to meeting fractional reserve requirements for their leverage positions. When insolvent, zombie giants like Citi were then restructured, recapitalized, broken into healthy, regional-, market- or product-specific entities and sold on the open market to capital investors, I guess that would mean that certain people would have awful problems keeping appointments with their in-laws and golfing partners, though –and that’s truly terrifying to those folks.

The very day that a bank gives the money back, the FDIC should be asking them for balance sheets testifying as to meeting fractional reserve requirements for their leverage positions.
-
I’m not entirely certain that would apply to Goldman per se as they are not a “bank” inasmuch as they are an investment house (that did some fine paperwork chicanery to become TARP eligible). I think that was part of what Geithner was asking for, a better method of investigating those entities outside of the FDIC/SEC purview.

BTW SZ I totally agree with you. As soon as the loan is repaid they have to account for the reasons why they needed it. Oh and no second thoughts either, you don’t need the money at the terms given tough you lose.

This is death to corporate governance. Granted the United States government is an institutional investor and financier of GM but that does not give the federal government the right to circumvent corporate governance and force an ouster. This decision should have been made by GM’s board of directors. When investors start involving themselves in operational decisions, they risk tearing a hole in the very corporate veil that is designed to protect them.
Alton E. Drew
http://www.altondrew.com

This is death to corporate governance.
-
Because the current system of corporate governance is working soooo well isn’t it? Breaking up the good ol’ boy networks that serve on multiple boards and vote over and over for insane compensation packages can only be a good thing for the U.S. economy going forward.

“This is death to corporate governance. Granted the United States government is an institutional investor and financier of GM but that does not give the federal government the right to circumvent corporate governance and force an ouster.”
.
No its not. If we learned from Enron it should be that we can not wait to get back to the status quo and then act surprised all over again.

That should be “if we learned on thing from Enron.”

Obama has opened himself up to criticism of both too much government oversight of private industry by ousting Wagoner and a misstep in rebuffing more efforts to save GM and Chrysler. This is a very bold move.

http://www.political-buzz.com/

As gunny has pointed out, by now Americans should have learned that too little oversight of private industry by government can be just as bad as too much.

Really, its a case of GM seizing its last chance to survive, not an unwelcome encroachment of gov’t on corp governance.
.
“Change your management team or we pull out our support” is one of the basic–albeit hamfisted–control levers that investors and financial backers have. Usually its another aspect of business that is ordered replaced/reworked, but calling for the ouster of the guys in charge is certainly not unprecedented.
.
Now, will it be a meaningful change? That I don’t know. GM now has to replace its leadership as well as overhaul its business. Will it be too much? What is the timeline on Wagoner’s departure?
.
Tune in next week, I suppose.

http://www.redstate.com/blackhedd/2009/03/30/lipstick-on-a-pig/