Obama rocks GM’s boat

Obama rocks GM’s boat

The CEO of GM has been asked to step down, and the US government is giving automakers ultimatums. Looks like the free ride is over.

March 30, 2009 1:25 by Dana El Baltaji

The White House has forced the CEO of General Motors Corp to step down after the auto company banked on more government support to help fund its ailing business, reports Reuters.

“On Friday, I was in Washington for a meeting with administration officials,” Rick Wagoner said in a statement. “They requested that I ‘step aside’ as CEO of GM, and so I have.”

Rick Wagoner ran the automaker since 2000, and has presided over the company during its unprecedented decline. In 2003 he was appointed chairman and CEO of the carmaker. During his time at GM, the company’s stock price fell $70 a share to less than $4, and its market share has plummeted by 10 percentage points.

Wagoner will be replaced by GM president and chief operating officer Fritz Henderson; and GM director Kent Kresa has been appointed as interim chairman. The government will also be replacing board members in an attempt to revamp the company’s corporate governance and its approach to innovation.

The forced resignation is the second since the financial crisis hit the US economy. In September 2008, the CEO of American International Group (AIG) Robert Willumstad was forced to resign after AIG received the first of two federal loans.

Recently, GM requested an additional $16 billion in loans from the US government, but the administration declined the request. Instead, the government offered to provide financial support for the next 60 days, giving the company time to rethink its business models.

The automaker is currently surviving on a $13.4 billion loan it received from the government in December 2008.

On Thursday, March 26, GM stocks jumped 12 percent after a published report suggested that the government is likely to provide the troubled car-marker with additional loans, and after GM announced that 12 percent of its hourly workforce agreed to leave their jobs, reported Forbes.

On Monday, US President Barack Obama is expected to address the nation with the government’s plans for the future of GM and Chrysler LLC.

The administration has told Chrysler it will pull federal funding to the automaker if it does not strike a deal with Italy-based Fiat within 30 days.