Power of the FIRE Sector: GM CEO Out, Bank CEOs Untouched

[World Traveler]

"The Obama administration asked GM CEO Rick Wagoner to step down, according to numerous reports...

Reuters reports:

University of Maryland economist Peter Morici, a one-time critic of Wagoner who had called for him to resign but now believes he had "started to get it," said the administration has a "PR problem" regarding unpopular corporate bailouts.
"They are bailing out just about anybody that shows up and says they need cash. The public has grown weary of it and instead of throwing a banker to the wolves they have decided to throw Wagoner to the wolves," Morici said.

Congressman Thaddeus McCotter, a Detroit-area Republican and member of the House Financial Services Committee, was critical of the White House decision, claiming that Wagoner was a victim of a double standard:

"Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date. Mr. Wagoner has honorably resigned for the sake of his company's working families.
When will the Wall Street CEOs receiving TARP funds summon the honor to resign? Will this White House ever bother to raise the issue? I doubt it."

http://www.huffingtonpost.com/2009/0..._n_180516.html

[KGW]

Re: Power of the FIRE Sector: GM CEO Out, Bank CEOs Untouched

Bankers are special. . .They have all the money!

http://www.msnbc.msn.com/id/29944834/


Obama denies bailout funds for automakers
President set to unveil the government’s plan to aid autos industry


GM CEO Wagoner to step down
March 30: Under pressure from the White House, General Motors chairman and CEO Rick Wagoner quits as the government says the company has not done enough to turn itself around. NBC’s Chuck Todd reports.

The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit.

GM boss steps down at White House’s request
Geithner makes his case on Sunday news shows
Stocks’ March rally will be tested this week
Bank CEOs: We’ll work with Obama on crisis
More states see jobless rate top 10 percent
Obama to unveil auto aid plan Monday
updated 26 minutes ago

WASHINGTON - The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.

President Barack Obama is sending a blunt message to Detroit automakers: To survive — and win more government help — they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler’s restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.
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Obama is scheduled to speak on the government’s plans to help the automotive industry at 11 a.m. ET.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive — and that the Obama administration will have a hands-on role in those changes.

Michigan Gov. Governor Jennifer Granholm said Wagoner “clearly is a sacrificial lamb” who stepped aside “for the future of the company and for the future of jobs.” She spoke on NBC’s “Today” show Monday.

Obama said the companies must do more to receive additional financial aid from the government.

“We think we can have a successful U.S. 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,” Obama said on CBS’ “Face the Nation” broadcast Sunday.

Fears of an automaker bankruptcy pushed stocks down more than 200 points in early trading on Wall Street.

Frustrated administration officials, speaking on condition of anonymity ahead of Obama’s announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.

Shawn Morgan, a Chrysler spokeswoman, declined to comment ahead of Obama’s announcement.

In Warren, Mich., Chrysler employees reacted with wariness to the Chrysler-Fiat pairing and anger toward the administration’s moves.

“Right now it looks like our only hope,” 37-year-old lineman Douglas Kozak said of the possible deal with the Italian automaker after arriving at the Warren Truck Assembly plant. “You’ve got to expect the worst and hope for the best.”



Machine repairman Don Thompson, a nearly four-decade Chrysler veteran, said the automakers are being punished because of populist anger over the financial bailout.

“They’re using us for the mistakes they’ve made in Washington,” Thompson said.

For GM, the administration offered 60 days of operating money to restructure. Officials say they believe GM can put together a plan that will keep production lines moving in the coming years.

New directors will now make up the majority of GM’s board. Fritz Henderson, GM’s president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

“The board has recognized for some time that the company’s restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience,” Kresa said in a written statement.

The Obama administration move comes amid public outrage over bonuses paid to business leaders and American International Group executives — set against a severely ailing economy.

GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more. The White House balked and instead started a countdown clock.

Two people familiar with the plan said bankruptcy would still be possible if the automakers failed to restructure. Those officials spoke on condition of anonymity because they were not authorized to make details public.


An exasperated administration official noted that the companies had not done enough to reduce debt; in some cases, it actually increased during this restructuring and review process. GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

[don]

Re: Power of the FIRE Sector: GM CEO Out, Bank CEOs Untouched

Another mastodon in the parlor. Yes, American auto is riddled with problems, led by their drinking the financial speculation kool aid, but the tossing away of this invaluable fixed capital national asset could not make clearer the non-support for investing in America's dwindling real economy.

[Sharky]

Re: Power of the FIRE Sector: GM CEO Out, Bank CEOs Untouched

If GM goes into bankruptcy, presumably that will trigger payment on the GM CDS contracts. Seems like another large wealth transfer in the works. I'm guessing banks will be the winners.... Maybe this is another part of the backdoor bank rescue plan?