On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I “step aside” as CEO of GM, and so I have.
Fritz Henderson is an excellent choice to be the next CEO of GM. Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM’ers worldwide to succeed. I wish him well, and I stand ready to support him, and interim Non-Executive Chairman Kent Kresa, in every way possible.
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Category: News Blog
President Obama concludes his remarks on the auto industry:
“But there is something I want everyone to remember. Remember that it is precisely in times like these—in moments of trial and moments of hardship—that Americans rediscover the ingenuity and resilience that makes us who we are. That made the auto industry what it once was. That sent those first mass-produced cars rolling off assembly lines. That built an arsenal of democracy that propelled America to victory in the Second World War. And that powered our economic prowess in the first American century.
Because I know that if we can tap into that same ingenuity and resilience right now; if we can carry one another through this difficult time and do what must be done; then we will look back and say that this was the moment when America’s auto industry shed its old ways, marched into the future, and remade itself, once more, into an engine of opportunity and prosperity, not only in Detroit, and not only in our Midwest, but all across America.”
Ironic counterpoint courtesy of CBS News and several recently laid-off employees of a Western Michigan GM dealership.
Irony is the discrepancy between expectation and reality. Hypocrisy is the discrepancy between publicly stated intention and privately implemented execution. I’ll let you decide where President Obama’s statement on the federal government’s intervention in the “U.S. car industry” falls. No matter what you call it, there’s a huge disconnect between the President’s assertion that “We have no interest in running GM; we have no intention of running GM” and the fact that Presidential Task Force on Automobiles (PTFOA) is running GM. I mean, you can’t get much more interventionist than forcing the automaker’s CEO to resign and moving to replace the entire Board of Directors.
The Presidential Task Force On Automobiles (PTFOA) came, they saw, they laughed. Well, maybe not laughed. But there’s a kind of humor in the fact that the PTFOA shot holes in every single one of the company’s assumptions, save the idea that a FIAT merger will save Chrysler. The federal quango’s “Determination of Viability Study; Chrysler, LLC” is, to say the least, not kind to the automaker’s assertions. It slates ChryCo’s scale (too big), quality (sucks), product mix (sucks), manufacturing (outdated), and geographic concentration (U.S.-centric). And then concludes. without any credible justification “A partnership with another automotive company, such as Fiat or another prospective partner, which addresses many of these issues could lead to a path to viability for Chrysler.”
The Presidential Task Force On Automobiles (PTFOA) came, they saw, they laughed. Well, maybe not laughed. But there’s a kind of humor in the fact that the PTFOA shot holes in every single one of the company’s assumptions. The quango’s “Determination of Viability Study; General Motors Corporation” is, to say the least, not kind to the automaker’s assertions. Looking forward, some of GM’s stakeholders have a lot to worry about. Dealers: “These underperforming dealers create a drag on the overall brand equity of GM and hurt the prospects of the many stronger dealers who could help GM drive incremental sales.” European ops: “The European business is seeking additional capital beyond the funds requested from the Treasury. These funds have not been allocated and thus represent a risk to the viability of GM’s current plan.” Strangely missing from this report: any mention whatsoever of labor costs. Nothing, save “legacy liabilities.” Huh.
I had the privilege of driving a Pagani Zonda. Nice car, especially for a guy who used to design Argentinean trailers. The Zonda’s interior periscopes (vents) were a bit much, but the engine and handling made up for it. The R looks a bit extreme for my tastes. Still, it might be a bit of fun.
Click here for the Presidential Task Force on Automobiles’ “Restructuring Fact Sheet.” Perhaps the most relevant statement: “The new GM will have a significant focus on developing high fuel-efficiency cars that have broad consumer appeal because they are cost-effective, have good performance and are reliable, durable and safe.” I guess branding isn’t the PTFOA’s forte, as that’s about as generic a description of a car as you can get. Hey guys, pick one. Of course, they can’t say that. So we have to assume that the first on the list is considered the most important; it certainly fits in with the ruling party’s political priorities. And, as TTAC’s Best and Brightest point out below, it would be easy enough for the feds to make fuel efficiency THE key sales determinant: just hoik the gas tax. See how that works?
The Presidential Task Force on Automobiles (PTFOA) has seized control of Chrysler and GM, the latter more completely than the former. As part of their Monday manifesto, the PTFOA has laid the groundwork for Chrysler’s liquidation and GM’s entry into Chapter 11. They’ve created a new Warrantee Commitment Program that will guarantee Chrysler and GM vehicle purchases, even if (when) the automakers go belly-up. TTAC’s Ken Elias calls ChryCo’s final approach. “To do the Chrysler–Fiat deal, the secured bank lenders need to write off their loans. Why would they? They get more in a Chrysler liquidation. And even if they make a ‘deal’ with Fiat, so what? How does it solve the problems for the next several years before any Italian technology (small cars, small engines) shows up in Chrysler products? So Chrysler goes to liquidation.” As for GM, even the neophytes at the PTFOA know it can’t do what it needs to do outside of bankruptcy. Given that the automaker will now have the full backing of the federal government, controlling everything from car “warrantees” (warranty?) to the Board of Directors, why not? Who wouldn’t trust American Leyland?
Students of history may recall the Works Progress Administration (WPA). Born in the heart of the Depression, 1935, the agency created some three million federal jobs, sucked-up $11 billion worth of taxpayer money (back when $11 billion was a lot of money) and built hundreds of roads, bridges and buildings That said, the WPA did sweet FA to decrease unemployment figures. And its inefficiency was legendary (nicknamed the “Whistle, Piss and Argue”). But the WPA was an integral part of a sea change in federal government power and scope. And now, it’s back! The Detroit News mentions, almost in passing, that Presidential Task Force on Automobiles (PTFOA) is creating a “Director of Auto Recovery for Auto Workers and Communities.” The man tipped to spread the love: Edward Montgomery, a “top labor economist” and former deputy labor secretary. Eddy’s tasked with “working to leverage all resources of government to support the workers, communities and regions that rely on the American auto industry.” His official PTFOA remit after the jump.
The New York Times reports that GM CEO Rick Wagoner has resigned his position with the ailing American automaker. Wagoner will tender his resignation ahead of President Obama’s statement at 11 a.m. today regarding the next round of bailout bucks for the zombie automaker. “As recently as March 18, Mr. Wagoner said in an interview that he had no indication that his job was in jeopardy because of the task force.” The PTFOA has directed that Wagoner’s hand-picked successor and current COO Fritz Henderson assume the top slot—temporarily. Word has it that Steve Rattner, the head of the Presidential Task Force on Autos, initiated Wagoner’s long-overdue defenestration. [General Motors Death Watch below.]
The Presidential Task Force on Automobiles (PTFOA) has given Chrysler 30 days to tie-up with Fiat or it will recall federal loans and throw the company into bankruptcy. If they DO do the deal, they get a $6 billion “loan.” I’m no corporate negotiator, but the move seems to give all the power to Fiat, an automaker with its own share of troubles. Well, not ALL the power, according to The Detroit News:
“Chrysler’s deal with Fiat has been restructured, a government official said, to reduce its initial ownership stake down from 35 percent. Fiat wouldn’t be able to obtain a majority of Chrysler until the new $6 billion in government loans were repaid, the official said. The fact sheet also notes that there are guarantees of U.S.employment in the plan. “After extensive consultation with the administration, (Fiat) has committed to building new fuel efficient cars and engines in U.S. factories,” the fact sheet said.
Press reports confirm that GM CEO Rick Wagoner’s hand-picked successor Fritz Henderson will succeed him—temporarily. According to The Wall Street Journal, the Presidential Task Force on Automobiles (PTFOA) sent GM a memo mandating that the company replace Wagoner with Henderson as interim CEO and elevate Board Member Kent Kresa as interim chairman of the board. The clear implication: the PTFOA is now in control of GM at its highest levels and fully intends on restructuring the automaker according to its own strategy. To justify this wholesale assault on free market capitalism, the PTFOA ripped GM’s viability plan to shreds. The Journal reports the ultimate condemnation: “While the Company has made meaningful progress in its turnaround plan over the last few years, the progress has been far too slow, allowing the Company to continue to lag the best-in-class competitors.”
Reuters reports that the Presidential Task Force on Automobiles (PTFOA) is taking a “hard line” on the next round of federal bailout bucks for Chrysler and GM. As we’re in the political realm, “hard line” means taxpayers will fund the automakers for the next 60 days while the PTFOA rolls up its sleeves and takes greater control of Chrysler and GM’s business. The implication: they’ll force the unions and bondholders to take a buzz cut and accept a government mandated debt-for-equity swap. Oh, and re-org GM’s Board of Directors to better suit their, uh, tastes.
“We have unfortunately concluded that neither plan submitted by either company represents viability and therefore does not warrant the substantial additional investments that they requested,” said a senior administration official, who asked not to be named. Read More >
On hearing that Rick Wagoner is outta here, Asia-Pacific shares nosedived on Monday, which wiped out most of the gains they had made last week. It’s not that anyone is missing Red Ink Rick. Traders at the Asian exchanges see the departure as a sign that “the US government might allow one of the world’s biggest car makers, General Motors, to go bust,” writes the Financial Times [sub].
As Wagoner’s defenestration hit the wires, the Nikkei in Japan dropped 4.5 percent to record its worst day for two and a half months. Hong Kong’s Hang Seng lost 4.7 percent—its biggest fall in three weeks. Taiwan shares were down 3.4 percent and in South Korea the market dropped 3.2 percent.
A person close to General Motors told the Financial Times said that the resignation of Rick Wagoner at the weekend made it likely the company would file for bankruptcy protection sometime in the next few weeks.
It’s been the weekend of the long knives for auto execs the world around. Rick Wagoner “did the right thing” and “resigned.” Meanwhile, across the frog pond, the board of French carmaker PSA had to unceremoniously fire Chief Executive, Christian Streiff, on Sunday. They replaced him with Philippe Varin, who will take up the position on June 1, Reuters writes.
The French board definitely has less of a stomach for losses than their American colleagues. Streiff was let go “after Peugeot last month posted a €343m ($460m) net loss and said it expected to stay in the red until 2010,” says Reuters. A measly three digit million number would barely register on a Detroit Richter scale. Not so in France. They want rolling heads:
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