While this may seem trivial, this is HUGE business, and potentially political, news:
The Obama administration asked Rick Wagoner, the chairman and CEO of General Motors, to step down and he agreed, a White House official said.
On Monday, President Barack Obama is to unveil his plans for the auto industry, including a response to a request for additional funds by GM and Chrysler. The plan is based on recommendations from the Presidential Task Force on the Auto Industry, headed by the Treasury Department.
The White House confirmed Wagoner was leaving at the government’s behest after The Associated Press reported his immediate departure, without giving a reason.
From the business perspective.
While GM has been under the mismanagement of Wagoner & Co. for some time, I find it extremely unlikely that the current administration would call for the CEO’s resignation if they did NOT intend to provide some for of funding/financing to the company, even if said financing is for a short period of time.
Bottom line – expect the Government to provide some form of a lifeline to General Motors on Monday. Maybe not a full-blown bailout but some form of assistance with heavy restrictions on how the money will be utilized.
What you don’t see in the press this evening (well, now this morning) is any mention of Chrysler. Since the Fiat partnership has fallen onto hard times, it seems as if things have become very grim for the company. If I were a betting man, and I think I am, I would guess that some form of Bankruptcy is in the offing for the home of Jeep and Dodge…unless they can pull together something quickly.
From the political perspective.
The United States is officially a socialist country. I know that sounds VERY extreme so ignore your initial thoughts on what socialism is and hear me out.
Socialism is political idea that supports government (“the state”) ownership and management of companies.
How else can one describe the state telling a PUBLIC company what it must do in order to obtain something? Yes, banks can do so as conditions of a loan but the U.S. government is not a bank. Interestingly enough, no bank is even willing to give GM or Chrysler loans… because their business model has failed…. because financial institutions, as messed up as they are, know that extending credit or funding to these members of the auto industry equates to a poor business decision.
In the end…
The Administration decided to take a very, very dangerous path if they continue to push for recovery without Bankruptcy and if they are truly calling the shots within the automakers.