Turnover at GM, as US seeks greater auto reforms

CEO Rick Wagoner is said to be out. In assessing industry's plans for revival, Obama has asserted that the automakers 'aren't there yet.'

By , Staff writer

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    General Motors CEO Rick Wagoner talks about the company's restructuring plans in this February file photo. Wagoner is said to be stepping down as part of the government's plan for GM.
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Change at the top of the big Detroit auto firms may be necessary for political reasons. But it is unlikely by itself to make any real difference in their fate.

That is the judgment of one expert reacting to news that General Motor Corp.'s chairman and chief executive, Richard Wagoner, has been asked by US government officials to step down as part of the company's restructuring deal with the Obama administration.

"They've been changing chief executives a lot in the US auto industry over the last 20 years," says Donald Grimes, an economist at the University of Michigan. "But they always seem to end up with the same problems."

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Neither GM nor the US government has made an official announcement of the change. But according to a report from the Associated Press, Mr. Wagoner has agreed to step down immediately.

The reported moves come after President Obama earlier on March 29 said that both GM and Chrysler had to carry out more restructuring before they would get any more government loans. GM is seeking an additional $17 billion. Chrysler wants another $5 billion. So far this year, GM has borrowed $13.4 billion from the US Treasury.

Wagoner "basically had to go as a sacrificial lamb," says Dr. Grimes, who studies the auto industry.

Over the past two decades, the Big Three had been run by a variety of types of executives – some from finance, some from engineering, even some from outside the industry. The current head of Chrysler, Robert Nardelli, came from Home Depot.

But right now, GM's and Chrysler's futures may largely depend on getting both auto unions and bondholders to accept deep concessions. It's not clear whether throwing Wagoner overboard will make those stakeholders more likely to agree to make sacrifices of their own.

The troubled firms have made serious efforts to reform, and the White House believes that the US can have a successful auto industry.

But GM and Chrysler “aren’t there yet,” said Mr. Obama in an interview with CBS NewsBob Schieffer that was broadcast on “Face the Nation” on March 29.

“We think we can have a successful US 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,” said Obama.

In some ways, Wagoner may in the end be glad he's being relieved of his duties. GM must also figure out a way to shave its number of dealerships. As an international firm, it faces negotiations over cutbacks with unions and governments from many nations.

“The situation is a mess," says Grimes, adding that the Bush or Obama administrations should have asked Congress to pass a law granting a government "car czar" the powers of a bankruptcy judge, allowing them to force agreements on the unions and holders of auto-firm debt.

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