General Motors Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, administration officials said Sunday. The news comes as President Obama prepares to unveil additional restructuring efforts designed to save the domestic auto industry.
The officials asked not to be identified because details of the restructuring plan have not yet been made public. On Monday, Obama is to announce plans to restructure GM and Chrysler in exchange for additional government loans. The companies have been living on $17.4 billion in government aid and have requested $21.6 billion more.
Wagoner, 56, joined the company in 1977, serving in several capacities in the U.S., Brazil and Europe. He has been chairman and chief executive since May 1, 2003.
Obama said Sunday that GM and Chrysler and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future.
In an interview with CBS’ Face the Nation broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.
“They’re not there yet,” he said.
“We think we can have a successful U.S. auto industry. 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,” Obama said.
A person familiar with Obama’s plans said last week they would go deeper than what the Bush administration demanded when it approved the initial loans last year.
Wagoner’s departure indicates that more management changes may be part of the deal. Wagoner has repeatedly said he felt it was better for the company if he led it through the crisis.
Wagoner, in an interview with The Associated Press in December, declined to speculate on suggestions from some members of Congress that GM’s leadership team should step down as part of any rescue package.
“I’m doing what I do because it adds a lot of value to the company,” Wagoner said in a Dec. 4 interview as GM sought federal aid from the Bush administration. “It’s not clear to me that experience in this industry should be viewed as a negative but I’m going to do what’s right for the company and I’ll do it in consultation with the (GM) board (of directors).”
Obama said the government would require a “set of sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers. Everybody’s gonna have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road.”
Both companies are trying to reduce their debt by two-thirds and persuade the United Auto Workers union to accept several cost-cutting measures.
General Motors said in a statement that it expected a decision soon but “it would not be appropriate for us to speculate on the content of any announcement.”
Very little was being done in negotiations with debtholders and the union ahead of Obama’s announcement, a person briefed on the GM talks said Sunday. This person did not want to be identified because the negotiations are private.
Under the terms of a loan agreement reached during the Bush administration, GM and Chrysler are pushing the UAW to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care. They also want labor costs from the union to be competitive with Japanese automakers with U.S. operations.
Neither GM nor Chrysler have deals with the union on the trust funding or concessions from their debtholders and the administration has been trying to accelerate those efforts.
GM and Chrysler employ about 140,000 workers in the U.S.
Members of the president’s auto industry task force have said bankruptcy could be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. The conditions could be more stringent than the loan terms set by the outgoing Bush administration in December, officials have said.
GM and Chrysler face a Tuesday deadline to submit completed restructuring plans, but neither company is expected to finish their work. The administration’s plan would be designed to accelerate those efforts.
GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.
In February, GM said it intended to cut 47,000 jobs around the globe, or nearly 20% of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.
Chrysler issued two scenarios in its February plan: one, as a distinct company, and the second, in an alliance with Italian automaker Fiat SpA. Fiat executives have talked to the task force about a proposal to acquire a 35% stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8 billion to $10 billion.
Chrysler said in its February report that it would cut 3,000 workers and eliminate three vehicle models, the Dodge Aspen, Dodge Durango and Chrysler PT Cruiser.