G.M. Chief Is Said to Be Resigning in Deal With U.S. – New York Times (3/29/09):
The chairman and chief executive of General Motors, Rick Wagoner, is resigning, just hours before President Obama was expected to unveil his rescue plans for G.M. and the ailing American auto industry, a person close to the decision said Sunday.
Mr. Wagoner was asked to step down as part of G.M.’s restructuring agreement with the Obama administration, according to an administration official who spoke on condition of anonymity because a formal announcement has not been made yet*. Mr. Wagoner then agreed to resign.
G.M. and Chrysler are on the verge of exhausting the $17.4 billion in federal loans given to them since December. G.M., which received $13.4 billion, has asked for up to $16.6 billion more, and Chrysler, which got $4 billion, another $5 billion.
The president’s auto task force is expected to recommend more short-term assistance to the two Detroit companies, but with tight strings attached to the money and a new deadline to get concessions from union workers and creditors.
There was this odd period in December, after the TARP was passed and before those loans to G.M. and Chrysler were approved, where it seemed like every reporter and media outlet was determined to ignore the abject hypocrisy of the Bush administration shoveling money to Wall Street while making the automaker CEOs literally beg for a couple months of operating expenses. The starkest illustration came in the form of private jets: TARP recipient Citi was awaiting delivery on 3 Falcon 7Xs valued at $120 million, while media attention forced Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler to drive ~1000 miles round trip for their second Congressional appearance. Not far behind the private jet example comes the issue of compensation. While the Wall Street firms were ingesting $350 billion in TARP funds (and who knows how much more in AIG counterparty make-goods) they were lavishing their employees with bonuses. Even after “top executives” skipped their bonuses, Goldman gave out more in bonuses than they took in in TARP money. At the same time, the right managed to inject their absurd rhetoric about rank-and-file auto workers making $70/hour into the traditional media. Billions and billions for fake financial alchemists? Sure! An honest wage for current auto workers and long-promised pension and health benefits for retirees? Hell no!
At the time, I didn’t worry too much about this hypocrisy (other than my head exploding) because I chalked it up to the death rattle of the Bush administration trying to poison the well just a little bit more before they left office. Obama was theoretically a Democrat, and he wouldn’t allow all this to continue, or so I was assured by his wise and prescient supporters. Oh well:
Schieffer: Mr. President, you’re scheduled to announce on Monday what you plan to do with the auto industry as they’re asking for more federal money.
President Obama: Right.
Schieffer: You’ve told them they’re gonna have to cut back, present a different business plan. Our sources tell us that as far as the White House is concerned, they’re not there yet. Do they have to do more in order to get this money?
President Obama: Yes. They’re not quite there yet. There’s been some serious efforts to deal with a combination of long-standing problems in the auto industry and the current crisis, which has seen, you know, the market for new cars drop from 14 million to nine million. Everybody’s having problems, even Toyota and other very profitable companies.
And so what we’re trying to let them know is that we want to have a successful auto industry, U.S. auto industry. 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.
And that’s gonna mean 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.
Schieffer: But they’re not there yet.
President Obama: They’re not there yet.
Ken Lewis at BofA, Vikram Pandit at Citi, and every other bank CEO remains in place, with government bailout money financing bonuses, and a brand new plan for the government to leverage and backstop investors who want to buy securities from their failed banks. Meanwhile, autoworkers have proposed new concessions on top of the concessions they accepted in 2007. Wagoner gets axed. Bondholders face haircuts. Shareholders face dilution. But, Obama says “they’re not there yet.” I wonder, then, on the scale of “there” to “not there”, where are the banks?
And on the scale of “there” to “not there”, where is your saviour, and bringer of change from all that was Bush, Obama?
*Well, it seems there is a twist.
The White House says neither General Motors nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.
President Barack Obama and his top advisers have determined that neither company is viable and that taxpayers will not spend untold billions more to keep the pair of automakers open forever. In a last-ditch effort, the administration gave each company a brief deadline to try one last time to convince Washington it is worth saving, said senior administration officials who spoke on the condition of anonymity to more bluntly discuss the decision.
Awesome. You know, I don’t recall Wall Street’s “acceptable plan” but I am familiar with “taxpayers [spending] untold billions to keep the bank’s doors open. I spent part of Friday watching CNBC interview the bank CEOs who were invited for high tea and a round of Obama apologizing for threatening their bonuses. Today, Wagoner gets the ax, and Obama plays chicken with 140,000 American jobs and the vast majority of the U.S. auto industry. Both sectors have screwed up about as badly as is imaginable, but it’s difficult to imagine that there is less overcapacity on Wall Street relative to Detroit.
I’ll wait for an explanation as to why this all makes sense. I’m sure Summers and Geithner fully explained both sides, and offered their expert, reasoned, and balanced advice. And I’m sure they are standing by to show off their deft political touch when even the most favorable measure of the unemployment rate passes 10% this summer.
For so many reasons and in so many ways: