Monday, March 30, 2009

GM CEO Fired - By Obama

Now that GM stands for 'Government Motors' rather than 'General Motors', the Obama Administration has decided it needed a scapegoat to blame any past and future problems on as it attempts to revamp GM in its own way.

GM's George W. Bush is going to be GM CEO Rick Waggoner:

Wagoner, 56, who spent 32 years with GM working all over the world, stepped down effective immediately, the company said in a statement early Monday. He was replaced as CEO by Fritz Henderson, the company's vice chairman and chief operating officer.

GM board member Kent Kresa, a former chairman and CEO of Northrop Grumman Corp. (NOC), was named interim chairman and said new directors will make up the majority of GM's board when a new slate is nominated for election at the company's annual meeting in August.

"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.

GM shares tumbled 86 cents, or 24 percent, to $2.76 in premarket trading Monday. That is down 89 percent from its 52-week high of $24.24 on April 30, 2008.

The management shake-up, according to several industry analysts, shows that the administration is serious about forcing GM to change more quickly and dramatically than it did during Wagoner's nearly nine-year tenure as CEO.

Jeremy Anwyl, chief executive of the automotive Web site, called the move "political theater" to appease an increasingly bailout-weary public.

"American taxpayers are not happy," Anwyl said. "But this way you're able to point to Rick and say he's gone, and that creates an environment where the loans become politically palatable."

By all accounts, Wagoner made progress in fixing GM. While CEO, he cut its U.S. work force from 177,000 to roughly 92,000 today.

Wagoner also closed factories; shed the unprofitable Oldsmobile brand; globalized GM's engineering, manufacturing and design to save billions; and led a resurgence in quality and performance of its long-neglected cars. In 2007, the company reached a landmark agreement with the United Auto Workers that shifted massive retiree health care costs to a union-run trust and ushered in a $14-per-hour wage for new hires, about half that of a current laborer.

But critics, including many members of Congress, say Wagoner moved too slowly, failing to cut enough of the company's huge health care and pension costs, and relying too long on high-profit pickup trucks and SUVs as gas prices rose and the market shifted toward smaller vehicles.

In the past four years, GM has piled up $82 billion in losses.

It would be interested to see how much of those losses can be attributed to GM's bloated union contracts, pension entitlements and forced compliance with government regulations.

As I mentioned before, the easy solution for GM and Chrysler would have been to let them go Chapter 11, thus allowing them to get out from under the union contracts they were saddled with and make a new start. The feds could have helped out by ensuring the existing vested pension obligations were fulfilled, which would have cost a lot less over the long run.

For the Obama Administration to do any better than Waggoner did, they're going to have to abrogate those union contracts..and I'm betting that won't happen largely because the UAW gave over $11 million to the Democrats in 2008.

So a sin offering was needed to blame the ensuing mess on. Waggoner was it, just like George W. Bush has been it for the mess the Obama Administration has made out of the economy. And between ourselves, I think President Obama enjoyed firing him, for reasons I'll leave to your imagination.


Toronto Real Estate said...

I don't really understand why the government has to be so involved with this company (same with Chrysler and Ford). They are a joke when it comes to being effective, they did nothing to stop the declining in sales in the last decade and they did not respond to the new trend of smaller cars with better gas mileage. Who will buy a 6liter truck these days? So why make them? They seriously need to reconsider their products and then they would deserve some tax payers' help.

Take care, Julie

Freedom Fighter said...

Hello Julie and welcome to Joshua's Army.

In fairness to GM, the biggest problem they had wasn't thier products. It was being saddled with ridiculous union contracts and pension entitlements that originated a long time before the present downturn.

If you look at foreign car companies in the US that are successful, (Honda, Toyota, etc)there's a direct correlation between the companies that are successful and the degree of unionization. Additionally, not having been in operation so long and not offering the generous pension plans GM has over the decades, companies like Honda lack the entitlements albatross.

That's why Chapter 11 would have been the way to go for GM an Chrysler rather than huge government buyouts.

Another consideration as far as US auto makers surviving is concerned is a strategic one. Every so often, the US feels the need to build some tanks or APCs and that is far better done by American owned companies here in the US than by foreign owned companies that may have some issues to deal with.

Regards, and thanks for dropping by,


louielouie said...

just shooting from the hip here, the reason gm may not have declared chap 11 is because that would have meant those pricey pensions would have been transfered to that PBC company or some such which is a quasi-gov't company that picks up stuff like that from companies that default on pensions or some such.
and given the current occupant of the white house desire to obstruct justice gm probably thought they wouldn't come out on the other end anyway.
this wagoner guy may be thinking about going to work for someone like honda just to drive another nail in the coffin of gm.
or it could be that sarah palin just got herself a campaign manager.
time will tell.

Reaganite Republican Resistance said...

Although he seems to think he's the nation's CEO now, with Obama's management experience he couldn't get hired to run a muffler shop.

And firing the head of General Motors must be quite a coup for a power-mad narcissist like Barack- what a rush, man. His Marxist-professor mentors would have been so proud. But, it's costing GM $20M to let Wagoner go, and with dubious benefit- which is now on the taxpayer's tab, of course.

Barack Obama making business decisions and deciding who keeps their job and who doesn't is a very bad idea... he doesn't know anything about capitalism- except for that he doesn't like it very much.

Anonymous said...

On the GM issue, the distant cousin of Sarah Palin is Harlow Waite Gage, the vice president of General motors!

Freedom Fighter said...

Woooo, a distant cousin..I smell an evil Palin conspiracy!

This is apropos of what exactly?