by Mark Silva
General Motors' troubles may or may not have started when it decided that it could make $10,000 a copy putting leather bucket seats and mobile DVD-players on pickup truck chassis and calling them sport utility vehicles, fleet-mileage standards be damned.
But the company's troubles in Washington grew a lot worse when its executives, and their colleagues from the other ailing Big-Three automakers, landed their corporate jets at Washington's airport last fall seeking $25 billion in bailout funding from Congress.
They were sent packing, and only the mercy of the Bush administration's Treasury Department spared two of them - GM and Chrysler - from the threat of bankruptcy.
But, $17.4-billion in federal aid later for the two big automakers, they are returning to town for yet more aid. And the Obama White House, demanding major "concessions'' from not only the companies and their executives, but also their labor unions and private lenders as the president prepares to announce - Monday morning at 11 am EDT at the White House - the next phase of the federal government's assistance for GM and Chrysler, is exacting a big concession from the top brass at GM.
The job of GM chairman Rick Wagoner.
As Obama unveils his administration's plans for the automakers Monday morning, the Associated Press reported tonight, "one condition became clear today: the resignation of General Motors Corp. Chairman and Chief Executive Rick Wagoner. As a condition for additional government aid to GM, the Obama administration asked Wagoner to step aside, which Wagoner agreed to do today, people familiar with the plan said.''
(General Motors Chairman and CEO Rick Wagoner is pictured above earlier this year speaking at GM headquarters in Detroit. in a photo by Rashaun Rucker / Detroit Free Press / MCT.)
This ends a 31-year career for Wagoner at the onetime giant of not only the auto industry but also American manufacturing.
"Not since President Franklin Roosevelt considered taking control of Ford Motor Co. in 1943 from a failing Henry Ford has the federal government pushed for such sway in the management of Detroit's automakers,'' the AP notes. "The tack suggests a hard-nosed approach from the Obama administration toward the automakers, bondholders and the UAW, all of whom have yet to reach agreements on key concessions, despite months of talks. ''
Wagoner's company has lost $82 billion in four years, and may be remembered as :the CEO at the helm when GM required at least $13.4 billion in government aid to stay alive,'' AP notes.
"Early in his tenure as chief executive, Wagoner outlined a strategy for GM to focus on developing countries where the auto industry still had large potential growth, such as Brazil, Russia and China,'' the AP reports
. "By 2005, GM was selling more vehicles overseas than in North America and GM was the No. 1 car company in China, with the Buick brand in China outselling its U.S. base. But Wagoner could never halt the steady decline of GM's market share in the U.S., fueled by rising foreign competition and GM's higher costs, which eventually allowed Toyota Motor Co. to surpass GM as the world's largest automaker last year. ''
When he became chief of GM North America in 1994, the company held 33 percent of the U.S. market. Last year, GM's sales had fallen to 22 percent of the market. And now, the Obama notes, with the American auto market in its worst slump in three decades, it is time for a radical redesign of the business model.
GM already had to shed some of its corporate jets after they became a symbol of excess when the chief executives of the auto industry flew to Washington last fall on their private fleet asking for billions of dollars in federal aid from Congress.
Explaining Congress's unwillingness to give the automakers what they wanted, Sen. Harry Reid, the Senate Majority leader, said: "The main reason is what we've all witnessed in the congressional hearings this week. The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last.''
Those were prophetic words, months before the newest round of federal aid that the Obama White House will grant.
The jets were no help, Reid (D-Nev.) said then:
"What happened here in Washington this week has not been good for the auto industry. I know it wasn't planned, but these guys flying in their big corporate jets doesn't send a good message to people in Searchlight, Nevada, or Las Vegas or Reno or any place in this country,'' he said.
"We want them to get their act together. We want them to come up with something. We are here to help. We're not against the auto industry. We want to help those people keep those jobs. And yes, we're kicking the can down the road because that will give us the opportunity to do something positive. But that will only happen if they get their act together.''
And apparently, at GM, that started today.
Comments
Good God above, did Obama ask any of the BANKERS to resign? has he asked anyone else to resign? Why this guy?
Obama is driving us straight into bankruptcy and oblivion. He is a real piece of work.
Posted by: beth | March 29, 2009 9:02 PM
I'm with Beth this time. Good christ.
UNION BUSTING in addition to VIETNAMIZING the Irafghakistan OIL WAR?
HEY HEY LBJ! HOW MANY KIDS DID YA KILL TODAY?
HEY HEY OH-BAH-MAH!
HOW DO YOU SAY 'HE'S DEAD!' TO HIS MA?
Posted by: IT'S THE CAMPAIGN CASH==TURNS EVERYTHING TO S**T | March 29, 2009 9:43 PM
Whaddya mean, Silva, "fleet-mileage standards be damned"? Cars and trucks have different mileage standards, and GM met them, with both fleets.
How about writing about something you know a little about, next time?
Posted by: DaveB | March 29, 2009 9:57 PM
See South Park's hilarious take on Obama's bailouts at http://www.youtube.com/watch?v=Geb6po7Z0PQ
Posted by: Bruce | March 29, 2009 10:06 PM
They sold them as cars, and thought they were pretty clever about it. They lobbied for and won separate standards for light trucks, which they aren't.
Posted by: Mark Silva | March 29, 2009 10:09 PM
GM should certainly fire its army of lobbyists (Dave B included).
Bruce, you realize South Park is a joke, right? Good news source, man...
Posted by: Kenny Bunkport | March 29, 2009 10:25 PM
Hey campaign guy! Glad to have you with me, I think, anyway. Did you know, before Obama, that I was a card-carrying, Bush-loathing liberal? Now I'm still a liberal, but an Obama-dissenting one. Can't still him. Think he's totaally unqualified. Wish HRC had won... It's a hard world out here for people like me...
Posted by: beth | March 29, 2009 10:25 PM
Meant to say of Obama, "can't STAND him." And I can't. His wife, either. Think his two girls are cute, though.
Posted by: beth | March 29, 2009 10:26 PM
Was Wagoner charging too much for chrome wheels?
Paulo
Posted by: Paulo | March 29, 2009 11:32 PM
Same failed leadership still at helm in Wall St., or paid retention bonus and then leaving, but not under compulsion.
In Detroit, it's a very different picture.
What gives?
Posted by: ornery | March 30, 2009 12:26 AM
I guess it was the union workers, who decided to make the SUV, the money-maker !! The entire managerial staff needs to be shown the door !! What does loan sharking, have to do with making and selling cars ? There should be more CEOs, shown the door !! That is the only way to teach theses incompetents, or greeds, America is tired of their uselessness.They must hit the road, with a Yugo !! That should teach them, the value of a decent job, even though, they were over paid !! Shame on the corp of CEOs and their management teams. They are a embarrassment to America's workforce !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, America | March 30, 2009 12:46 AM
With Obama slant toward unions- Bet the Auto Workers will come out of this smelling like a rose.
And the American companies still wont be completive world wide making subdised products.
Posted by: Inky | March 30, 2009 6:42 AM
This is like doing business with the mob, you may think you run the company, but you aren't
Posted by: Terry | March 30, 2009 6:52 AM
Wish HRC had won... It's a hard world out here for people like me...
Posted by: beth | March 29, 2009 10:25 PM
Ahhhhh....that explains it!
Posted by: Jon Stewart | March 30, 2009 7:40 AM
If people commenting on this topic are so smart and know what will work, what are you doing sitting in your basement commenting on this blog? Why aren't you in DC or Detroit fixing the mess?
As far as the fleet rates, it is known that auto companies have a few products that meet or exceed the emission caps and the rest of the products do not. They have been okay because the AVERAGE meets EPA standards.
Right now on Washington Journal they are discussing Cap and Trade. Can the Trib look into the comment I just heard about the money that is being amassed by people investing/buying in to this practice? I heard something about GE buying up factories in Africa and shutting them down so they can use the non-emissions of those plants to offset their emissions. In essence, many companies are cheating the system before it is even in place in the US. Or did I miss something on this subject in past articles/posts?
Posted by: lochnessmonster | March 30, 2009 8:31 AM
Mark, the way the government defined "truck" for the purpose of the fuel economy standards, they are trucks. Minivans are trucks. Heck, the Chrysler PT Cruiser, a worked-over Neon small car, is a truck for the purpose of the fuel economy standards.
Arguably, the fuel economy standards led to the rise of minivans and SUV's as daily transportation. There used to be a vehicle called a "station wagon." They got worse mileage than sedans (heavier and all that) so when the fuel economy standards came out they were the first to go. The need, though, for a vehicle that would carry the whole family, Fido, and some extra stuff didn't disappear. Minivans had existed before; remember the VW Microbus, the Ford Econoline van, the Chevy Sportvan? Chrysler rearranged the concept, configured it so that it would be a truck, and they were off to the races.
And, Kenny Port (I'm debunking you), I'm not a lobbyist for the auto industry, I don't work for the auto industry, but I have paid attention to the industry and to regulation in general for a lot of years. So GM can't fire me!
Posted by: DaveB | March 30, 2009 8:58 AM
Nessie, they're called the "Average Fuel Economy Standards" (AFES) for a reason. The "Corporate Average Fuel Economy" is a weighted (by production volume) average of the EPA composite fuel economy for each model of a company's production, to be compared to the average fuel economy standard for each model year.
And, they've been a failure. Do what I did; go to the Energy Information Administration Web site and download the gasoline usage for each year since 1978, the year the first AFES took effect. Then go to the Bureau of the Census and download the US population figures. Divide the one by the other, and you'll find that absent major price blips like we had last year, the annual per-capita gasoline usage in this country has been pretty flat.
Why is this, in the face of rising AFES? Any economist could tell you why; if you make something cheaper, as the AFES does driving, people consume more of it. Last year's price blip also tells you what to do if you really want to reduce gasoline usage, instead of just make noise about it: Make it more expensive. Our elected representatives in Washington, though, know that that would be political suicide, so they punish the car companies for producing the cars and trucks that we will buy, instead.
Posted by: DaveB | March 30, 2009 9:59 AM
This entire ordeal is slightly chaotic. It does seem inconsistent that President Obama will fire Wagoner from GM, yet only helped bailout the numerous AIG employees that have actually been found guilty of NOT doing their jobs. I would agree, though, that GM has been suffering under Wagoner, and, whether it is his fault or not, he was the CEO. Thus, maybe it is time for some revamping. Federal intrusion into this business though will be heavily criticized, and it seems to me it might have been wiser for the Obama administration to focus on the banks first. I watched an interesting video on all of this at newsy.com earlier today. It shows the different viewpoints and is worth watching:
http://www.newsy.com/videos/obama_to_gm_ceo_step_aside/
Posted by: Kt D | March 30, 2009 4:45 PM
I guess firing the head of General Motors must be a real coup for a power-mad narcissist like Obama- what a rush. And his Marxist-professor mentors would be SO proud-
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But good luck finding a capable replacement willing to take-on such a herculean task with the whole country looking over his shoulder, while working 15 hrs/day for a buck-a-year... then having 90% of his bonus confiscated by congress.
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http://reaganiterepublicanresistance.blogspot.com
Posted by: Reaganite Republican | March 30, 2009 6:28 PM
Why $20 Million? He should have gotten just like any other fired employee! Nothing!
Posted by: Ron Lockwitch | March 30, 2009 11:25 PM
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Sarah
http://grillsblog.com
Posted by: Sarah | April 3, 2009 9:25 AM