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The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.

On Monday, President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department.

The White House confirmed Wagoner was leaving at the government's request after The Associated Press reported his immediate departure, without giving a reason.

General Motors issued a vague statement Sunday night that did not officially confirm Wagoner's departure.

"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," the company said.

The surprise announcement about the classically iconic American corporation is perhaps the most vivid sign yet of the tectonic change in the relationship between business and government in this era of subsidies and bailouts.

Wagoner has been CEO for 8 years and at GM for more than 30. It is not yet clear who would replace him, or what role the administration would play in that process.

Industry sources had said the White House planned very tough medicine in Monday's announcement, which turned out to be an understatement. And it went to the very top. The measures to be imposed by the government will have a dramatic effect on workers, unions, suppliers, bondholders, shareholders, retirees and the communities where plants are located, the sources said.

GM and Chrysler first requested billions in federal aid in November, warning that they could run out of cash in a matter of months if they didn't receive it. In December, President Bush agreed to loan $9.4 billion to GM and $4 billion to Chrysler.

Last month, GM asked for $16.6 billion more and Chrysler requested an additional $5 billion.
Earlier this month, Obama agreed to loan $5 billion to American auto parts manufacturers to help them weather the steep drop in new vehicle orders and the financial uncertainty at the Big Three.

Obama and his aides may have honed in on Wagoner for two reasons. First, his company is asking for the most in total federal aid: $26 billion, a figure administration officials fear could grow even larger. Second, the GM chief was tied more directly to the ill-fated decisions that that brought much of the American auto industry to the brink of collapse.

Wagoner joined GM in 1977, has had a senior role in GM management since 1992, and became CEO of the company in 2000. He is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years.

By contrast, Chrysler CEO Robert Nardelli, whose resignation does not seem to have been demanded as a price of further federal aid, was a newcomer to the auto industry when he was lured to that company to help turn it around. Nardelli had previously headed Home Depot.
Government officials have little reason to tilt at Ford CEO Alan Mulally since his firm has not actually taken bailout funds from the government. Ford asked for a $9 billion line of credit from the feds, but the firm has said it has no plans to tap the credit facility.

Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees.

Obama said Friday in an interview with CBS’s “Face the Nation,” broadcast Sunday, that the carmakers were going to have to do more.

The Obama administration calls its task force “a cabinet-level group that includes the secretaries of Transportation, Commerce, Labor and Energy. It will also include the chairman of the President’s Council of Economic Advisers, the director of the Office of Management and Budget, the EPA administrator, and the director of the White House Office of Energy and Climate Change. The Task Force will be led by Treasury Secretary [Tim] Geithner and [National Economic Council] Director Larry Summers.”

The panel’s chief adviser is Steven Rattner, a well-known investment banker and former New York Times reporter.

Labels: automotive bailout

On Inauguration Day, 2009 - Michigan Republicans and Democratics stand united to welcome our new President.

Obama moved into the Oval Office today around 12:15 as the nation's fourth-youngest president, at 47, and the first African-American. This barrier-breaking achievement was once believed impossible by generations of minorities.

For many a Michigander (that was hit hard by the current economic condition), today was a ray of hope in a dismal downward swirl of layoffs, automotive job losses and real estate value drops, as well as stock market dives.

I look at it as a "Ray of Hope" also. Not that I am a democrat, it should be pretty obvious from past posts that I had supported McCain and Palin, but it is a hope that the majority of American's will start trusting America and the economy in the United States again.

Anyone that is as old as myself realizes that "Trust must come before Recovery". It is the trust that starts the stimulus that eventually will lead to recovery.

We need to all refrain from the typical thinking ... "If only we get a Democrat in the White House, things will be okay. If only we pass this or that new legislation, things will be fine. If only we defeat this or that new tax, things will be okay." Nonsense. Things will not be okay based on a single action.

The "four day work weeks" have to transform back to "five day work weeks". Everyone in Michigan has to roll up their sleeves and pitch in.. give a little bit more, work a bit harder and learn something new.

"Learn Something New?" .. novel.

When we stop hoping for additional external assistance, when we stop hoping that the awful situation we are in will somehow resolve itself, when we stop hoping the situation will somehow not get worse, then we are finally free—truly free—to honestly start working to resolve it.

When "The Ray of Hope" fades, the action can begin.

Today that Ray of Hope came, tomorrow it will start to fade. Let's get moving Michigan and start generating new ideas, new jobs, new incentives for business to stay here.

"Action?" ..novel!

We've been here before, Michigan and we all know that we will be here again. Now is the time to start the turn-around. We look at it as a rebirth of new ideas, exciting new jobs and endless possibilities - we hope you do too. Got an idea? Start a new business.

Labels: automotive bailout, Presidential Campaign

(Summarized from CNNMoney.com)

Deal to move forward on $14 billion bailout measure falls short, possibly bankruptcy for GM and Chrysler?

The future of the U.S. auto industry was in trouble Friday morning after a proposal for $14 billion in federal loans died in a late night Senate vote.

The failure followed the collapse of negotiations between Senate members seeking a compromise that both parties, as well as the companies and the United Auto Workers union, could accept.

The late-night developments could doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler LLC potentially following close behind.

While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.

"We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," according to the GM statement.
GM has continually said it could not continue to operate if it is forced to file for bankruptcy.

In response to reports that the company has hired a prominent bankruptcy attorney, GM said its board "is meeting frequently and monitoring the situation very closely and is committed to considering all options -- as is management -- and has engaged appropriate advisors for all contingencies."

However, the Big Three could still wind up getting government funding. Bush officials warned wavering GOP senators earlier Thursday that if they didn't support the legislation, the White House will likely be forced to tap funds from the Wall Street bailout to lend them money, two Republican congressional officials told CNN.

The White House has been strongly opposed to using any of the $700 billion in bank bailout funds to help the auto industry, but the Bush administration has also said the Big Three must get some financial assistance soon.

While the package was far less than the $34 billion requested by the automakers earlier this month, it would have seen them through their current cash crisis.

GM has said it needs $4 billion by the end of the month or its cash reserves will fall below the level it needs to continue operations. It needs another $6 billion in the first two months of 2009, according to its request to Congress. Chrysler had said its cash would run out early next year and it would need $4 billion in the first quarter to continue operations.

Hopes for compromise quickly faded

Senate Minority Leader Mitch McConnell, R-Ky., said the sticking point was the United Auto Workers union's refusal to put employees at U.S. auto manufacturers at "parity pay" with U.S. employees at nonunion plants operated by foreign automakers in the United States.

Negotiations centered around proposals from Sen. Bob Corker, R-Tenn., that would have set dates in 2009 by which the automakers receiving the loans had to reach cost cutting agreements with unions and creditors or be forced into bankruptcy.

Corker said the two sides were very close to a deal and stumbled on the deadline for the union to agree to the reduced pay.

"We are about three words away from a deal," Corker said.

Currently, analysts estimate the union workers at U.S. automakers make about $3 to $4 per hour more than the non-union U.S. employees of foreign automakers like Toyota and Honda, according to the Center for Automotive Research.

The benefit costs are significantly greater for U.S. automakers, though, because they have to pay health care costs for hundreds of thousands of retirees. The union agreed to close much of that gap in the 2007 labor agreements by shifting responsibility for retiree health care to union-controlled trust funds. But those changes won't take effect until 2010.

The House easily passed the bailout bill Wednesday night but it quickly ran into trouble in the Senate, where Republicans objected to several provisions.

Labels: automotive bailout

I received an interesting survey phone call this morning and since it peaked my interest, I took the entire survey. It was about the troubles in the automotive industry and where the blame lies.

Up front, I want to disclose my job background. Prior to my current career, I worked for Chrysler for about 18 years. Leaving automotive 8 years ago was difficult for me, I left because of personal reasons. I loved my job, loved the industry and loved the people around me. I still keep in touch with many of my friends and it breaks my heart to see how worried they currently are. Retirement savings are at stake, homes, families ... you get the picture.

Back to the survey.

The purpose of this particular survey was to identify where Americans put the blame for the problems the Auto industry is currently experiencing. One in every 10 Americans make a living from the Auto industry, so the problem is far-reaching outside of the Detroit area. To sum up the survey in one question:

Where do you put the primary blame for the Auto industries woes:

1. Management
2. Government
3. UAW

What is your age group and political affiliation? Are you female or male?

How can one entity take the blame for this disaster? Impossible. Option 4 on this survey should have been "The Perfect Storm" - a combination of economic, international and political issues spun together at precisely the right moment to cause the most intense upheaval.

The bottomline question that needs to be answered is should the government help bailout GM and the automotive companies in general? Is GM about to declare bankruptcy? A GM bankruptcy could create a cascading set of bankruptcies among OEM part suppliers, other auto makers and suppliers. That's because a bankrupt company could take months, if ever, to pay its pre-bankruptcy bills. Such delays would put stress on suppliers that already run on thin working capital and that feed just a few end auto makers.

What is your opinion - should the government help? If the government does help can it cause far reaching problems in other areas? Can they afford to do this? Can they afford to not do it?

The only thing that can be said for sure is the underlying goal should be to help Americans get through this crisis and come out of it with a stronger economy. Repeat... stronger economy.

Labels: automotive bailout