WASHINGTON — The White House on Sunday pushed out the chairman of General Motors and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.þþThe decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.þþPresident Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy — a quick, court-supervised restructuring, as they described it — could still be an option for one or both companies.þþMr. Obama’s auto industry task force, in a report released Sunday night assessing the viability of both companies and detailing the administration’s new plans for them, concluded that Chrysler could not survive as a stand-alone company.þþThe report said the company would get no more help from the government unless it can finalize a proposed alliance with the Italian automaker Fiat by April 30. It must also reduce its debt and health-care obligations.þþIf a deal is reached between Chrysler and Fiat, the administration says it would consider another loan of $6 billion to Chrysler.þþG.M., on the other hand, has made considerable progress in developing new energy-efficient cars and could survive if it can cut costs sharply, the task force reported. The administration is giving G.M. 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time. þþAlong with Mr. Wagoner’s ouster, the task force said most of the company’s board of directors would be replaced over the next few months.þþMr. Wagoner’s resignation is the latest example of the government taking a hands-on role in making major decisions at companies it is bailing out. The government has already pushed banks to make management changes and sharply reduce or eliminate their dividends, and it also is directing many of the decisions at the troubled insurance giant American International Group, which is nearly 80 percent owned by the government after its rescue.þþIn deciding to urge Mr. Wagoner to step down, the Obama administration seemed mindful of the public’s growing outrage over bailouts of private companies, as well as the bonuses paid to employees of A.I.G.þþMr. Obama is well aware that he cannot afford to give the appearance of using tax dollars to reward executives who have done a poor job, and he began signaling as early as last week that he would take a tough stance with the automakers.þþIn a question and answer session at the White House on Thursday, the president said there had been “a lot of mismanagement of the auto industry over the past several years,” and declared that more government help would be contingent on the companies’ “willingness to make some pretty drastic changes.” þþThe plan Mr. Obama is to announce on Monday will also include government backing of warranties for G.M. and Chrysler cars and trucks, to give consumers enough confidence to buy them, even if one or both are forced into bankruptcy.þþIn Detroit, G.M. had no immediate comment on the sudden resignation of Mr. Wagoner. Company officials said G.M. would issue a statement about Mr. Wagoner after Mr. Obama revealed his plan in Washington. þþMr. Wagoner has presided over a steep drop in G.M.’s domestic market share, which has led to tens of billions of dollars in losses. His critics have said that management’s failure to move aggressively to address the company’s problems contributed to its dire financial situation.þþ“The bigger surprise is not that he resigned. That was going to happen sooner or later,” said Michael Useem, professor of management at the Wharton School of Business at the University of Pennsylvania. “But the moment seems inexplicable.” þþG.M. and Chrysler have almost exhausted the combined $17.4 billion in federal aid they have received since December. G.M. has asked for up to $16.6 billion more, and Chrysler has requested another $5 billion.þþBondholders are under pressure to convert two-thirds of the $27 billion owed them into G.M. stock, while the United Auto Workers union is being asked to substitute stock for 50 percent of their health care benefits for retirees. Both groups have resisted those changes.þþAdministration officials say they have enough money to offer the assistance they envision under plans already approved by Congress. Even so, Mr. Obama may face skepticism on Capitol Hill and from the public.þþAs part of the companies’ original agreement for the loans, both were required to submit restructuring plans. Mr. Wagoner’s removal underscores how much more G.M. needs to cut than was proposed in the plan the company submitted. þþAdministration officials stressed that the company needed a fresh approach and leadership changes; they said Steven Rattner, the former investment banker who co-chairs the auto task force, delivered the news to Mr. Wagoner.þþPeople at G.M. said Mr. Wagoner was not available for comment Sunday night. As recently as March 18 he said in an interview that his discussions with the task force did not give him the impression that his job was at stake. “They so far haven’t commented on that,” he said then.þþFrederick A. Henderson, G.M.’s president, will replace Mr. Wagoner on an interim basis as chief executive; Kent Kresa, a board member, will assume the chairmanship. Members of the auto panel spoke with Mr. Henderson recently and came away with a favorable impression of him, people familiar with the panel’s discussions said.þþLike Mr. Wagoner, Mr. Henderson is a graduate of the Harvard Business School and a lifer at G.M. He started in the finance division in 1984 and later spent nine years in executive positions in South America, Asia and Europe. The Detroit-born son of a G.M. sales manager, Mr. Henderson, 50, became chief financial officer in 2006 and was named president and chief operating officer a year ago.þþMr. Wagoner’s departure at G.M. marks an end to a corporate hierarchy that spanned generations. The last G.M. chairman to leave under duress was Robert C. Stempel, who was forced out in 1992 by outside directors who blamed him for losses.þþMr. Wagoner, 56, came to G.M. in 1977 and rose to become chief financial officer in 1992 when he was 38. He oversaw the company’s North American business for years before being named chairman in 2000. þþG.M.’s share of its most important market, the United States, declined steadily under Mr. Wagoner. In 1994, when he took charge of North America, G.M. held 33.2 percent of the American car market. Last month, G.M.’s share was only 18.8 percent, according to statistics from Motorintelligence.com, which specializes in industry data. Auto sales in February were the worst for the industry since 1981.þþG.M. collapsed last fall when new-vehicle sales in the United States plummeted to their lowest level in 25 years. G.M. lost more than $30 billion in 2008, and has been subsisting on government loans since the beginning of the year.þþThe administration briefed lawmakers on the plan sunday night. Afterward, Representative Thaddeus G. McCotter, Republican of Michigan, whose district is just outside Detroit, expressed frustration over the ousting of Mr. Wagoner and with administration officials for not being clearer about the potential job losses that lie ahead. þþ“Why would you ask Rick Wagoner to resign when you are giving G.M. 60 days to meet a new target, but you aren’t saying what the new goal is yet,” Mr. McCotter said in an interview.þþ
Source: NY Times
