With President Obama scheduled to talk tommorow about bailouts for both G.M. and Chrysler it was announced tonight that Rick Wagoner was stepping down as CEO of G.M., effective immediately. The news was leaked by White House sources, as was the fact that Wagoner had been forced out by the White House.
The President spoke today on Face the Nation, and he said that the automakers had not yet made enough progress in restructuring to qualify for additional federal aid. The White House has been calibrating that message for over a week, building the expectation that tough measures would be required of all stakeholders in order for the President to approve additional help. From MSNBC:
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.
The bondholders are putting up quite a struggle on the issue of trading debt for equity, and labor, for all of the criticism it has received, is about to take a gigantic hit on retiree health care costs. Those costs have been transferred to a Voluntary Employee Benefit Association Trust, which was scheduled to take in some pretty hefty cash payments from the big three to fund the benefits. The UAW has just agreed to contract terms with Ford that would allow the company to substitute Ford stock for half of the cash Ford owes to the VEBA. G.M. will likely get the same deal on that issue. G.M. reportedly owes the VEBA $30 billion. The reluctance to sanction bankruptcy, even prepackaged, has to have some relationship to the fate of the retirees whose health benefits might be completely washed away by such a filing. What the governments responsibilities would be under such a scenario is not clear to me. But there would be a political firestorm.
So Rick Wagoner is fired by the President. Tommorow will be a key day for the auto industry in the United States.