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Rick Wagoner is no longer CEO of General Motors for two reasons. First, he failed to come up with a plan that satisfied the government that GM would be viable going forward. Two, President Obama needed political cover before he poured more money into the auto industry, a move which is strongly opposed by a majority of Americans.
Obama needed to show he was decisive and in control to maintain support for his efforts to provide taxpayer money to GM and Chrysler. And firing the chairman of General Motors will make it easier for the Administration to demand more concessions from the UAW.

While axing Wagoner caught me by surprise, after reading the Task Force's report, I almost wonder why the President didn't feel compelled to act sooner. The "Determination of Viability Summary" is a harsh critique of GM's plans. In the eyes of the Task Force, Wagoner simply did not move fast enough and did not meet the government's loan requirements: GM did not come up with a competitive labor agreement, did not renegotiate its VEBA payments, and did not come to an agreement with its bond holders. Indeed, under the latest plan GM submitted to the government, its restructuring efforts would not be completed until 2014.
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John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
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Wagoner simply did not move fast enough and did not meet the government's loan requirements.
Worse, the Task Force believes GM's plan made unrealistic assumptions. And yet, even with its rosy assumptions, GM's plan called for it to "generate negative cash flow" for years to come. Its legacy liabilities would cost $6 billion a year through 2014, requiring GM to boost sales by 900,000 vehicles a year to pay for it. But GM's plans didn't call for raising sales. Instead, it assumed that it would merely lose market share at a slower rate. The Task Force didn't buy that since GM is slashing fleet sales and closing brands.

It also found fault with GM's assumption that its North American Operations would increase its contribution (profit) margin, despite the move towards passenger cars where it has lower margins. And it pointed out that GM's lingering perception problems mean it must discount its cars.

The Task Force laid out a litany of problems it sees with GM's plan:
  • It's not getting rid of unprofitable or underperforming dealers fast enough.
  • Its European operations need government help which has not been forthcoming.
  • GM makes too much of its profits on trucks and SUVs, and is vulnerable to energy-price driven shifts in demand.
  • Of its top 20 profit producers, only 9 are passenger cars.
  • Most of its products are in the bottom quartile of fuel economy.
  • GM is a design generation behind Toyota in green powertrains.
  • The Volt will be too expensive to be a big commercial success.
  • The plan leaves no room for error. Even a 1% miss on sales volume in 2014 would mean another $2 billion less in cash flow.

Under its current plan GM would be at breakeven, at best, during the transition period. That alone failed the government's requirement for viability.

What really drove the last nail in the coffin is that GM is already behind in its plan for 2009.
But what really drove the last nail in the coffin is that GM is already behind in its plan for 2009 sales and market share. That sapped any confidence that GM would hold to its plan going forward.

So what's next? President Obama gave GM 60 days to come up with a new plan, or he's going to force the company into bankruptcy. Whether that means a pre-packaged bankruptcy or formally filing for Chapter 11 no one knows.

But we can be sure of one thing. GM's new CEO Fritz Henderson undoubtedly got the message. Either he's going to come up with a new plan that addresses each and every one of the Task Force's concerns, or General Motors is going to have a brand new CEO in 60 days.

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    • 1 Second Ago
  • 32 Comments
      • 5 Years Ago
      "Why didn't he act sooner" I hate when reporters use this observation. Hey McElroy where's your editorial article 2 months ago on acting sooner?

      Did you get an early copy of the Task Force's report a month or two advance?

      Let me guess you just read it as of just recent and come to the conclusion we should have acted sooner. Bright guy you are.

      President Barack Obama's explanation that "it took us a couple of days" to express outrage over the AIG bonuses "because I like to know what I'm talking about before I speak."

      Sounds like a man who's being smart about not rushing to judgment, I'm sure he waited for the Auto Task Force to do their job before he made any decisions.


      • 5 Years Ago
      A little off topic, but anyone else really annoyed by that picture of McElroy being used over and over again?
      • 5 Years Ago
      Why did Wagoner have to go but everyone at AIG is still in play??? Obama has no clue what he is doing!!!!!
      • 5 Years Ago
      Maybe Lutz should reconsider his decision to retire later this year, and be given the job of GM CEO. At least he is a car guy.
      • 5 Years Ago
      I say let the market run its course. If they are not competitive, they don't deserve to stay around. It would be much better for Obama to spend their money on something other than a total void that is GM. Take a page from FDR and invest heavily on infrastructure, hiring many who have been laid off by the Big 3 and other industries.

      No company is too big to fail, and the more you mess with the free market, the more screwed up it's going to be.
        • 5 Years Ago
        You realize that page from FDR actually worsened the true economic depression, right? That it was a smoke screen providing electricity and road access to the "rich" while the poor continued to live in the good old-fashioned way? That without surviving companies to use those roads, there's no money being poured into anything except by the government itself, which has to borrow money (that doesn't exist, because banks have no investors) or print more, leading to hyperinflation and decreased buying power, making it even harder for new companies to start? That it was WWII spurring the manufacturing base that ended the depression?

        The whole socialist system is flawed. With the exception of tariffs to favor your domestic market, there should be ZERO government interference in the marketplace.
        • 5 Years Ago
        I confess that I'm no expert on this particular history, but the thing with investing in infrastructure is that you get tangible results: clean water, better electricity, better communications, and quite importantly for anyone who even remotes drives, good roads. Why not spend those billions doing up roads, getting rid of potholes and bumps? Rather than pour it into this furnace that is Detroit?
      • 5 Years Ago
      After the lashing Obama and congress took after the latest AIG bonus fiasco, there was no choice but for government to get tough. But it is seriously a double standard when you consider the "drop in the bucket" requested by the auto industry relative to the significantly larger sums doled out to financial institutions with little to accountability.

      I especially believe that the Volt shouldn't even be in these discussions as it will probably not be a profit generator for years and years. It should probably be best considered a "beta" test for the public. GM needed good small cars long ago. But instead, it let it's vehicles such as the Cavalier and the Camaros fester on literally decade old platforms and ancient engine technology. This just goes to show that companies MUST ALWAYS invest in R&D regardless of current sales success. In the past when I bought a Honda, I knew that even in the lowly Civic I could get the latest VTEC engine technology, flowed down directly from experience in F1 engine building. Now I see Honda and Toyota as stagnating slightly and it's a great opportunity for the American Big 3 to catch up. And no, I don't consider the hybrids from Honda and Toyota to be ground breaking, especially considering the ugly bodies and crude suspensions and braking. They are simply in a race to be the cheapest, but certainly not the best.

      When GMs stock lost nearly 25% today, I was a bit perplexed. The governments insistence on GM cleaning up its act further should be a good sign that the company is being pushed to comply. That can only be a good thing for the company long term and thereby ultimately increase its stock value.

        • 5 Years Ago
        Rock,

        Just a thought

        1) GM over the past few years has made significant strides in technology - it's still behind in interior design, but that's a car-cycle thing (e.g. Cobalt). The CTS is arguably just as good as anything else out there, and said Cobalt has been getting raves in its SS form. Besides, can you name any Civic trim level with gasoline direct-injection as well as VVT? How about a Camaro with the same highway fuel economy as the Civic Si?

        2) With Obama publicly threatening Chapter 11 - and that's the only thing he can politically do - then it becomes a game of chicken between the bondholders and the government. The question is, who will blink first. The bondholders are betting Obama won't screw the unions and call for Chapter 11 on its largest employer, while that threat is being used on the bondholders who might lose it all anyway.

        In either case the stockholders are the ones who have no say in this - any action will either dilute their shares (if the bondholders and unions get equity, the original shareholders get their percentage of the company reduced) or if GM goes Chapter 11 (where the shares become worthless).

        So in any case, the share price would inevitably go down. I'm surprised it hasn't stayed below $2 in the first place.
      • 5 Years Ago
      My only question is, why doesn't the government require any company seeking tax dollars to fire/retire its CEO?
        • 5 Years Ago
        the problem with this thinking is that it is out of vengeance, not what's best for the company. you can't possibly say that it's better for a company to fire it's CEO without a) weighing the value of the current CEO and b) comparing it to the value of the CEO-to-be.

        getting rid of the CEO doesn't fix the problem unless a better CEO gets installed. otherwise it's just a very expensive way of saying FU to the ex-CEO
      • 5 Years Ago
      King Obama has spoken and now we’re left with the aftermath. I’m no fan of “Rick” he was in way over his head and should have been fired 5-6 years ago. What sickens me, are the criminal bank CEO’s who have received a free pass. Be sure to vote when the time comes.
      • 5 Years Ago
      Are you people who voted for "change" getting enough yet? November '12 can't get here fast enough, that is, unless the impeachment starts sooner....
        • 5 Years Ago
        Just wait until your taxes go up 20-30%+ to pay for all this spending insanity and you won't be able to afford eggs for your omelet anymore.

        That is, unless you are foolish enough to believe Obama when he says only the top 5% of wage earners will pay higher taxes. His voodoo math doesn't come close to adding up.
        • 5 Years Ago
        Hey, you gotta break a few eggs to make an omelet...
        • 5 Years Ago
        You accuse Obama of using voodoo math, then pull some figure of '20-30% tax increases' out of your rear. Unless you've got proof, you're just as ignorable.
      • 5 Years Ago
      "Obama needed to show he was decisive and in control to maintain support for his efforts to provide taxpayer money to GM and Chrysler. And firing the chairman of General Motors will make it easier for the Administration to demand more concessions from the UAW."--------John, i respect you, by what is wrong with you? Has it ever occurred to you that Wagoner was a bad CEO? This guy has been a CEO for 10 years, 10 years of losing market share, 7 years of slow death and 17+ million dollars a year as a compensation+ corporate jet+corporate credit card+20 million golden parachute.

      Wagoner is a CRIMINAL, as simple as that. He is a thief, a crook and a moron.

        • 5 Years Ago
        Good comeback.

        But to answer your question, Wagoner was the sole GM executive to pull for Pontiac Aztek. While most wanted it dead it was Wagoner who forced the company to build it.

        I, much like everyone on Autoblog would have killed Aztek...................so therefor i am more qualified than Wagoner. So i guess that make me qualified to run GM.
        • 5 Years Ago
        Wagoner is a CRIMINAL?
        according to what?...Mob rule?
        Be careful.AIG is losing talent because the Obama administration incited the rabble to terrorize bankers just like Hitler incited HIS fascists before WW2 to seize power.
        BEWARE OF LIBERAL FASCISM.
        • 5 Years Ago
        @ sea urchin:

        Wagoner was also at the helm for the CTS-V, ZR-1, and cobalt-ss. I'd say that makes up for the sins of the Aztek.
        • 5 Years Ago
        JC, he failed at everything and yet somehow got paid 17+Mill a year + a golden parachute.

        He killed the company and got a golden parachute.....how is that mob rule?
        • 5 Years Ago
        He's not a criminal/thief. He's just terrible at his jobs. I wouldn't mind my local McDonald's drive-thru specialists getting arrested though. They never get my order right!
        • 5 Years Ago
        Hey Urch, I know you've been orgasming since hearing about Obama's firing of your BFF Wagoner, but at least go over to Autoextremist.com for a balanced viewpoint from someone else who doesn't care for Wagoner.
      • 5 Years Ago
      basically Wagoner tried to fool them one more time and failed. He has failed on so many levels it is surprising that he was not let go long time ago.

      There is plenty of talent available in this superb country to replace people like Wagoner.

      Let's fire ALL Wagoners from all industries and give people with brains and talent a chance who are currently not getting their dues.


        • 5 Years Ago
        I can't help but notice that you want to fire everyone from every private industry, but no mention of government wags.

        Call me when a government bureaucrat gets held to the same standard, or Barney Fwank (sic) gets the perp walk, or a GSE's boardmember's names are subpoena'd for 90%+ taxation, or a Wall Street firm gets denied an endless supply of funds to bail out their bad bets.

        But until then, yeah - let's hang those private sector SOBs.
        • 5 Years Ago
        Any company that took the bailout money lost it's right to completely govern itself and should now be held accountable to the taxpayers as well as stockholders. I would be happy if the administration fired each and every one of these lead anchors in the auto and banking industries.
      • 5 Years Ago
      Well.Obama is extending the Bush bailouts to GM and Chrysler so maybe firing Wagoner could also be interpreted as a smokescreen.
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