GM CEO Rick Wagoner Sacked by Obama Administration!!!

[1991_Vn2nV]

DETROIT – General Motors Corp. 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.

Continued...

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 measures to restructure GM and Chrysler LLC 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's departure indicates that more management changes may be part of the deal, but it is still unclear who will be put in charge of GM. The automaker recently promoted Fritz Henderson, its former chief financial officer, to become president and chief operating officer. Many in the company thought he would eventually succeed Wagoner.

Detroit-based GM issued a statement Sunday saying only that the company expects a decision by the administration soon but that "it would not be appropriate for us to speculate on the content of any announcement."

A person familiar with Chrysler's management said the company has been given no indication that the government will require any changes at the Auburn Hills, Mich., company, which has been led by former Home Depot chief Robert Nardelli since August 2007. The person also spoke on condition of anonymity because Obama's plan has not been made public.

Wagoner, 56, has repeatedly said he felt it was better for the company if he led it through the crisis, but he has faced sharp criticism on Capitol Hill for what many lawmakers regard as years of missteps, mistakes and arrogance by the Big Three automakers.

Wagoner joined GM in 1977, serving in several capacities in the U.S., Brazil and Europe. He became president and chief executive in 2000 and has served as chairman and CEO since May 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.

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, in an interview with The Associated Press in December, had 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)."

Wagoner has been credited by auto industry analysts with doing more to restructure the giant bureaucratic automaker than any other executive. But given that he has been at GM's helm for so long, many of his critics say he moved far too slowly to take on the United Auto Workers and shrink the company as its market share tumbled.

While GM has improved its cars in the last two years, critics say the company relied for too long on sales of pickup trucks and sport utility vehicles for its profits and was unprepared for a drastic market shift when gasoline prices hit $4 per gallon last year.

During the Congressional debate over whether to give GM and Chrysler loans last year, many lawmakers criticized Wagoner, including Sen. Chris Dodd, D-Conn., chairman of the Banking Committee.

He accused automakers' top management of having a "head-in-the-sand" approach to problems and said Wagoner "has to move on" as part of a government-run restructuring that should be a condition of financial life support for the auto industry.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said Sunday that Wagoner's departure gives the government a rationale to provide additional aid to the automaker. He was not surprised by the move, but said he is disappointed because he considers Wagoner a capable leader.

"I think that as a condition for further government support, this helps give them a little cover with the public," Cole said. "Essentially he's taking one for the team."

Cole noted that other automakers have been shaking up management as well. He pointed to Toyota Motor Corp., whose president, Katsuaki Watanabe, recently said he would be stepping down as the Japanese automaker weathers financial difficulty. Also, France's biggest carmaker, PSA Peugeot-Citroen, abruptly ousted CEO Christian Streiff on Sunday, saying "exceptional difficulties" confronting the auto industry require new management at the top.

Cole said Nardelli's departure is less likely than Wagoner's because Nardelli is "relatively new" to the automaker, with less than two years at the helm.

Many GM executives likely will be disappointed at Wagoner's departure, Cole said.

"They had great affection for Rick — someone that's fair, that acts like a coach, that holds people's feet to the fire but has a good understanding of human behavior," Cole said.

GM and Chrysler were required by the Bush administration to get major concessions from debtholders and the United Auto Workers, with a deadline of March 31 for signed contracts. But very little headway was being made with either party this weekend as they awaited Obama's announcement.

Members of Obama's auto task force have said bankruptcy could still be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. Both companies are trying to reduce their debt by two-thirds and convince the United Auto Workers union to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care costs. The deals also call for executive pay cuts and labor costs that are competitive with Japanese automakers with U.S. operations.

Bondholders have been reluctant to accept the cuts, saying they're being required to sacrifice more than others, but they have been reviewing a recent offer by GM. The union has agreed to other terms of the loans, including work rule changes and reducing total hourly labor costs at U.S factories to a level comparable with Japanese automakers.

[minux]

Scary times when governments head large multi national companies.

This recession almost feels force fed by the governments. Almost like a way to gain control of the masses again.

[1991_Vn2nV]

Scary times when governments head large multi national companies.

This recession almost feels force fed by the governments. Almost like a way to gain control of the masses again.

I think its more common than some think. The company I work for used to be 50% owned by ABN AMRO which went bust and they were taken over by 3 parties, one of which is the Dutch government.

[VS Omega]

I'm not sure how this recession started, what's the basis for the whole thing? How did everything go from being not too bad to being a disaster, people getting laid off, prices going up, companies moving overseas to reduce cost... is it related to the price and supply of oil, is it about people wanting more (shareholders/bosses), more people living now than in the past or is it something I'm not seeing at all? Very curious, hopefully someone with more insight can tell me how it all went down hill.

[minux]

I think its more common than some think. The company I work for used to be 50% owned by ABN AMRO which went bust and they were taken over by 3 parties, one of which is the Dutch government.

Did ABN go bust?

No issue with governments owning a company, but telling companies how to run is the issue. Even bigger issues when they use funding as a measure to get what they want.

[danja]

That's all I'm saying...

[minux]

@ danja

[Reaper]

I'm not sure how this recession started, what's the basis for the whole thing? How did everything go from being not too bad to being a disaster, people getting laid off, prices going up, companies moving overseas to reduce cost... is it related to the price and supply of oil, is it about people wanting more (shareholders/bosses), more people living now than in the past or is it something I'm not seeing at all? Very curious, hopefully someone with more insight can tell me how it all went down hill.

It goes back over a decade to Bill Clinton. In between sessions of polishing his presidential knob, he had a great idea - give home loans to the minorities and poor so they can also live the American dream. George W tried to fix it a couple of years back but he was so far on the nose that even his own party thwarted his efforts (apparently).

So the lowdoc/nodoc loan proliferated. Unfortunately most of these people did not have loans previously for a reason (they had no hope of paying them back). The logic was that the cost of land would continue to increase and thus after a very short time, the banks would be covered for those loans that defaulted.

Many of these banks then on-sold the debt to other banks (mixed with a spattering of not so toxic debt) very much down playing any risk (afterall the cost of land never goes down does it?). Further more, some smart investors realized what was going on and started short selling the banks who were buying these "assets". More about this in a min.

Now, come mid 2007 and the American economy starts slowing and the housing market becomes depressed. All of a sudden many homes that should have been gaining in value were actually going backwards. Because of the slowing economy many were loosing their jobs and couldn't pay the mortgage. Further, many found their homes were now worth way less than they owed. Most American mortgages have a curious clause in the fine print that says that if the consumer can't pay the mortgage, they can simply return the house to the bank and be absolved of their debt (it becomes the banks problem to sell it and recover their money). The UK had a similar system till they had the same problem in the early 90's and changed to a system more similar to Aus where the bank can auction your house but if they don't recover all the money owed, the consumer is still liable for the balance.

Anyhoo - The term "Jingle Mail" comes from americans posting in the keys to their houses to absolve them of the debt. A few thousand at a time would have been a problem but nothing dramatic. A few hundred thousand was a major disaster. All of a sudden the banks had thousands upon thousands of assets with a book value of (say) $100,000 each but in reality were worthless. American banks went from a situation where there was a mild oversupply of houses to a huge oversupply as the keys rolled in. Property values collapsed.

Now, back to the "smart" investors who picked what was going to happen. These guys were shorting the banks such as Lehmen Brothers and Meryl Lynch (and many others), in effect betting that these loans were going to go bad. Then, when they did, for a relatively small investment (say $10,000) they profited several hundred thousand, thus multipying the effect of any and all bad loans to a level the world has never seen before.

Next, all these bad loans had been bought by banks all over the world (much like insurance underwriters do with insurance contracts) and put simply banks didn't know who they can trust any more. The entire wholesale money market shut up shop overnight. Put simply, banks didn't trust each other and they did (what every body else did) and pull their money out of international equities etc and held as much cash as possible, thus the wholesale drop in share markets around the world.

All of these factors have a snowball effect, what starts out as a small or moderate problem gets bigger and bigger as panic sets in. Now the world has a mess to clean up.

Reaper

[1991_Vn2nV]

Did ABN go bust?

No issue with governments owning a company, but telling companies how to run is the issue. Even bigger issues when they use funding as a measure to get what they want.

Well they were bought out by a consortium of 3 companies in 2007: Banco Santander, Fortis who went bust and this share was nationalised by Dutch Government and also RBS Group (Royal Bank of Scotland) who were bailed out by the UK government who took 70% of their shares now under control the company. Basically they acquired ABN and are breaking it up into 3 sections and will each walk away that.

ABN Amro were renamed RBS Group in Australia this month, which I assume is the first step towards RBS Group being the sole acquirer of the Australian operations.

[minux]

Well they were bought out by a consortium of 3 companies in 2007: Banco Santander, Fortis who went bust and this share was nationalised by Dutch Government and also RBS Group (Royal Bank of Scotland) who were bailed out by the UK government who took 70% of their shares now under control the company. Basically they acquired ABN and are breaking it up into 3 sections and will each walk away that.

ABN Amro were renamed RBS Group in Australia this month, which I assume is the first step towards RBS Group being the sole acquirer of the Australian operations.

Ah got ya, that would explain why we now deal with RBS staff for a company we do work for.

[Calaber]

Scary times when governments head large multi national companies.

This recession almost feels force fed by the governments. Almost like a way to gain control of the masses again.

Absolutely! I guess the government figures it has the right in view of the massive bail outs. who'd be a CEO in the States at present, particularly if your company was going pear shaped and you had your hand out.

[1991_Vn2nV]

Absolutely! I guess the government figures it has the right in view of the massive bail outs. who'd be a CEO in the States at present, particularly if your company was going pear shaped and you had your hand out.

Rick Wagoner was paid $11 million in bonuses in shares etc., which are now only worth about $900,000.

So in a way I guess he was hurting along with the company.

Be interesting to see who the new man for the job is.

[minux]

Kevin Rudd has probably said he will do it.

[1991_Vn2nV]

Yes well.. He is the 'economic superman'

[MasterOfReality]

Reaper, thats not what the left want to hear

The Democrats and Rudd keep wanting to blame all those capitalist pigs out there for the GFC, rather than looking where it all started - with an ideological brainwave from the Democrats.

[VS Omega]

Reaper that was an excellent read and actually made sense, so ultimately it was the decision to give people who couldn't afford to pay back the money loans which started this whole mess... surprised me, I would have suspected the oil the way it's all I ever hear about. I'm too young now in that I didn't understand what was happening at the time.

[Reaper]

Reaper that was an excellent read and actually made sense, so ultimately it was the decision to give people who couldn't afford to pay back the money loans which started this whole mess... surprised me, I would have suspected the oil the way it's all I ever hear about. I'm too young now in that I didn't understand what was happening at the time.

Pretty much. That sort of stuff could not and would not happen in Australia due to our banking system. Low Doc loans do exist here and there is no doubt many people who should not be given loans get money however our banks liquidity levels (ie cash vs loans) are mandated to be far more conservative than most of the rest of the developed world.

Reaper

[danja]

Reaper, thats not what the left want to hear

The Democrats and Rudd keep wanting to blame all those capitalist pigs out there for the GFC, rather than looking where it all started - with an ideological brainwave from the Democrats.

Both the law makers, and the people who capitalised on the situation deserve to held to account for where we are now.

It's a perfectly valid point that greed severely escalated the situation, even if it wasn't the sole factor.

[minux]

Greed hardly escalated the situation, what escalated it was government legally making it so money could be lent to those who cannot afford it.

What idiot would seriously lend money to people knowing full well it cant be repaid? Governments have alot to answer for in the US.

[50LTRv8]

It goes back over a decade to Bill Clinton. In between sessions of polishing his presidential knob, he had a great idea - give home loans to the minorities and poor so they can also live the American dream. George W tried to fix it a couple of years back but he was so far on the nose that even his own party thwarted his efforts (apparently).

So the lowdoc/nodoc loan proliferated. Unfortunately most of these people did not have loans previously for a reason (they had no hope of paying them back). The logic was that the cost of land would continue to increase and thus after a very short time, the banks would be covered for those loans that defaulted.

Many of these banks then on-sold the debt to other banks (mixed with a spattering of not so toxic debt) very much down playing any risk (afterall the cost of land never goes down does it?). Further more, some smart investors realized what was going on and started short selling the banks who were buying these "assets". More about this in a min.

Now, come mid 2007 and the American economy starts slowing and the housing market becomes depressed. All of a sudden many homes that should have been gaining in value were actually going backwards. Because of the slowing economy many were loosing their jobs and couldn't pay the mortgage. Further, many found their homes were now worth way less than they owed. Most American mortgages have a curious clause in the fine print that says that if the consumer can't pay the mortgage, they can simply return the house to the bank and be absolved of their debt (it becomes the banks problem to sell it and recover their money). The UK had a similar system till they had the same problem in the early 90's and changed to a system more similar to Aus where the bank can auction your house but if they don't recover all the money owed, the consumer is still liable for the balance.

Anyhoo - The term "Jingle Mail" comes from americans posting in the keys to their houses to absolve them of the debt. A few thousand at a time would have been a problem but nothing dramatic. A few hundred thousand was a major disaster. All of a sudden the banks had thousands upon thousands of assets with a book value of (say) $100,000 each but in reality were worthless. American banks went from a situation where there was a mild oversupply of houses to a huge oversupply as the keys rolled in. Property values collapsed.

Now, back to the "smart" investors who picked what was going to happen. These guys were shorting the banks such as Lehmen Brothers and Meryl Lynch (and many others), in effect betting that these loans were going to go bad. Then, when they did, for a relatively small investment (say $10,000) they profited several hundred thousand, thus multipying the effect of any and all bad loans to a level the world has never seen before.

Next, all these bad loans had been bought by banks all over the world (much like insurance underwriters do with insurance contracts) and put simply banks didn't know who they can trust any more. The entire wholesale money market shut up shop overnight. Put simply, banks didn't trust each other and they did (what every body else did) and pull their money out of international equities etc and held as much cash as possible, thus the wholesale drop in share markets around the world.

All of these factors have a snowball effect, what starts out as a small or moderate problem gets bigger and bigger as panic sets in. Now the world has a mess to clean up.

Reaper

Thats the best explanation for this crisis I have seen, so is it Reaper for PM?, you would have my vote

[greenfoam]

I have friends in California on other forums and I allways used to ask them how can they possibly afford a million dollar house. They just didn't seem to care that it was unpayable? (Reaper has explained this now so finally I understand why they didn't care)

[Reaper]

Greed hardly escalated the situation, what escalated it was government legally making it so money could be lent to those who cannot afford it.

What idiot would seriously lend money to people knowing full well it cant be repaid? Governments have alot to answer for in the US.

Greed wasn't the primary cause however it did escalate the situation. The guys short selling the low doc loan bonds magnified the problem significantly. Having said that, what they were doing is/was perfectly legal and was done routinely around the world. If I had known about it, I would have done it too.

Currently short selling and many other derivatives are banned from the ASX and other major stock markets around the world as a measure against the current crisis however it will be lifted shortly.

For those that don't know - short selling is in effect selling stock now that you don't own and betting that you can buy it at a certain some time in the future at a lower price (ie hoping that the share price will go down).

This is the opposite of the traditional "long" positions where you buy a stock now and hope that the market price will go up into the future and sell it at a profit.

Reaper