# GM head Wagoner quits at Obama's request. And? **URL:** \ **Category:** Great Debates\ **Created:** [March 30, 2009, 12:58am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240 "2009-03-30T00:58:30Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Keweenaw](https://avatars.discourse-cdn.com/v4/letter/k/da6949/32.png) [@Keweenaw](https://boards.straightdope.com/u/Keweenaw)\ **Post date:** [March 30, 2009, 6:21pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/41 "2009-03-30T18:21:54Z")
> [@jtgain](#): > > What if the car companies don’t do what Obama says? Is he going to let them fail? > > I thought we already played those cards when everyone in government said last fall that we couldn’t allow that to happen; that car companies were “too big to fail” and that if they failed the effects on the economy would be disastrous. > > Haven’t they called our bluff on this one? No, they are still considered ‘to big to fail’. The difference now is that that the administration has stepped up to say that if the bankruptcy path becomes necessary, they will either provide or secure the financing necessary, and also provide funding to uphold vehicle warranties during reorganization. ---
**Author:** ![Keweenaw](https://avatars.discourse-cdn.com/v4/letter/k/da6949/32.png) [@Keweenaw](https://boards.straightdope.com/u/Keweenaw)\ **Post date:** [March 30, 2009, 6:35pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/42 "2009-03-30T18:35:32Z")
> [@smiling\_bandit](#): > > Second, GM is already dead. They’re just trying life support on a terminal cancer patient with terminal heart disease and end-stage AIDS. The findings from Obama’s automotive task force tend to dispute this. [QUOTE=GM Viability Assessment] The Loan and Security Agreement of December 31, 2008 between the General Motors Corporation and the United States Department of the Treasury (“LSA”) laid out conditions that needed to be met by March 31, including the approval of Labor Modifications, VEBA Modifications, and the commencement of a Bond Exchange (all as defined in the LSA). As of the date of this memo, the above steps have not been completed, nor are they expected to be completed by March 31. As a result, General Motors has not satisfied the terms of its loan agreement. Additionally, after substantial effort and review, the President’s Designee¹ has concluded that the GM plan, in its current form, is not viable and will need to be restructured substantially while GM operates under an amendment to the existing LSA. **It is strongly believed, however, that such a substantial restructuring will lead to a viable GM** [/QUOTE] [The pdf file from the whitehouse is here](http://www.whitehouse.gov/assets/documents/GM_Viability_Assessment.pdf) [Or you can read the text on this site](http://blog.rebeltraders.net/2009/03/30/general-motors-auto-task-force-determination/) ---
**Author:** ![Keweenaw](https://avatars.discourse-cdn.com/v4/letter/k/da6949/32.png) [@Keweenaw](https://boards.straightdope.com/u/Keweenaw)\ **Post date:** [March 30, 2009, 6:43pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/43 "2009-03-30T18:43:35Z")
> [@Fuzzy\_Dunlop](#): > > So what’s up with Ford and their whole “not taking the latest round of bailout money” thing? I’m not an expert on the U.S. auto industry and I suspect Ford is not a fabulous company right now, but at least they don’t need billions to remain solvent. Don’t you think the fact that they didn’t even request money in the last bail out and are not currently being evaluated for viability by the Obama administration hurts your claim that nobody could keep an US automaker from failing? How’d they pull it off with the UAW trying so hard to ruin America? [[http://www.moneymorning.com/2009/01/29/ford-earnings/](http://www.moneymorning.com/2009/01/29/ford-earnings/)](Ford Says “No Bailout Funds” Despite Worst Loss Ever) Ford took out huge loans back when the credit market was favorable. They are essentially living on that cash while executing their own turn around plan and hoping for the economy to recover. GM and Chrysler’s loans are coming from the government, along with an intense scrutiny of their recovery plans. Appropriately scrutinized as they are tax payer funded loans. The outcome may be that Ford may be in worse shape in the long run, not having to make the tougher decisions or perhaps not benefiting from a government backed prepackaged bankruptcy to attain a clean balance sheet. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [March 30, 2009, 7:27pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/44 "2009-03-30T19:27:12Z")
> [@Keweenaw](#): > > The findings from Obama’s automotive task force tend to dispute this. Perhaps Obama and I disagree on the definition of “substantial”, but the statement as presented does not contradict me. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 30, 2009, 7:31pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/45 "2009-03-30T19:31:24Z")
> [@smiling\_bandit](#): > > First off, that’s wrong. Congress authorized funds for GM. Heck, it was their big ticket item and the center of the entire bailout hullaballoo. First they authorized all kinds of bridge loans. Then in December and January they went ahead with more money. That said, I don’t blame you for your confusion, since Bush was in the mess all through and I was speaking of the first step of the bailout, which was done using existing money. If you remember time was running out. Please, don’t make my supporting Bush more painful than it has to be. 🙂 > [@](#): > > Second, GM is already dead. They’re just trying life support on a terminal cancer patient with terminal heart disease and end-stage AIDS. > > As I’ve said before many times, this is just delaying the inevitable. GM needs to break up, all existing contracts (union, yes, but not just those) town up, the lines briefly shut down, and the company bought up at firesale prices. You may well be correct in all this. It may well be too late. Chrysler is in worse shape than GM, so they aren’t going to be snapping up anything. Can Ford take on the debt? Unlikely. Toyota would be the most likely candidate. The analysis I heard on NPR said that this is really setting GM up for bankruptcy (and Chrysler also if the FIAT deal doesn’t go through.) That would definitely allow all the changes you mention to take place, and help get rid of the excess dealers also, many of whom are protected by state laws and who can’t be dumped unless GM goes into bankruptcy. All possible - but maybe the prospect of the gallows will concentrate the minds of the new execs wonderfully enough so they’ll come up with something. And concentrate the mind of the union also. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 30, 2009, 7:36pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/46 "2009-03-30T19:36:50Z")
> [@Fotheringay-Phipps](#): > > More to the point (from my perspective, anyway) the main opposition in Congress was from Republicans, not from Democrats. So to say the “Democratic controlled Congress” voted it down is misleading, even if accurate. > > (try: “The Republican controlled Senate voted down Robert Bork”) True, but I object when Republicans say that Barney Frank prevented regulation of Fannie and Freddie when they controlled Congress, so I was trying to be fair. If the majority party can’t get something through, they shouldn’t whine that the minority is mean in opposing it. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [March 30, 2009, 8:00pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/47 "2009-03-30T20:00:55Z")
> [@Voyager](#): > > If the majority party can’t get something through, they shouldn’t whine that the minority is mean in opposing it. I don’t see that as being an issue. Majority parties don’t necessarily have absolute power on a given issue. What’s more important is which party tends to support what type of action. This has a bearing on what you can expect from this party in the future. In the case at hand, Republicans in Congress have been consistently more skeptical about buyouts than Democrats. Your post tended to suggest the reverse (in the case of automakers), which was incorrect. If Republicans have, say, 230 seats in the House, and they vote 210 - 20 in favor of Proposal X, but the Democrats vote 8 - 200 against it and the proposal fails, it’s misleading to suggest that the “Republican controlled House” opposed the measure and suggest thereby that the opposition is a Republican position. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [March 30, 2009, 8:02pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/48 "2009-03-30T20:02:28Z")
So, so far the answer to my question is, no, the only purpose is a public bloodletting, but that such a public execution has its place? Fritz Henderson, who has been the heir apparent anyway, now takes over, and is unlikely to be the clean sheet of paper that Obama speaks of desiring. Okay, he also spent a fair amount of time in Latin America and Asia and knows smaller cars and how to market them globally. And no learning curve - he knows where the keys are kept and where the fusebox is probably better than anyone. But a clean sheet? I don’t think so. The direction is set already. But the demise serves its function well it seems. The public’s bloodlust is pre-emptively sated before more money is handed out. The unions both have their satisfaction knowing that the top really is taking the heat along with the workers and a notice that indeed Obama means it when he brings up bankruptcy as the next step if they cannot make this work in the next 30 days. And a bankruptcy court would likely just void the union contracts completely unless major concessions were made. Those two combine to make their moving some more on concessions to be a bit less unlikely. And indeed other industries and players understand better that the gubbermint is not just a sap deep pocket but offers its help at a solid price. Don’t come to us unless you are so desperate that you are willing to pay. So a public bloodletting it is but perhaps a useful one afterall. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [March 30, 2009, 8:13pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/49 "2009-03-30T20:13:44Z")
I’m pretty jaded on the whole thing. I’d be willing to back a more thorough move or just ignoring the problem until it goes away on its own. This, frankly, smells to me like rather insipid populism or a particularly ignorant attempt to “fix” things. ---
**Author:** ![Keweenaw](https://avatars.discourse-cdn.com/v4/letter/k/da6949/32.png) [@Keweenaw](https://boards.straightdope.com/u/Keweenaw)\ **Post date:** [March 30, 2009, 10:00pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/50 "2009-03-30T22:00:32Z")
> [@DSeid](#): > > So, so far the answer to my question is, no, the only purpose is a public bloodletting, but that such a public execution has its place? Well, more was done today than just the dismissal of Wagoner. The Obama administration rejected GM’s restructuring plan. As per the original loan terms, they could have called the previous loans due immediately. It really goes beyond the UAW and bondholders logjam as well. Although these are the most pressing items to address. More aggressive cuts are required to come up with a truly viable plan. Although what’s necessary to achieve that isn’t spelled out, the task force will be taking a direct role in what changes are to be made. If the UAW and bondholders can’t come to an agreement, I expect it’s these items specifically that will be targeted in the prepackaged bankruptcy. With the ability to nullify state laws protecting dealership closure as an added bonus. I do agree with you that the administration’s removal of Wagoner was essentially for the benefit of the public opinion. Rejection of the restructuring plan alone would have given the task group any power they needed to force specific changes. Forcing Wagoner to leave is a demonstration of that power that might make public sentiment less hostile to supporting the industry. It might also serve as a strong disincentive, as some have mentioned, to other CEOs that might have been looking for government support. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [March 30, 2009, 10:02pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/51 "2009-03-30T22:02:20Z")
I don’t see how GM can ever pay back its $120 billion debt. The company is not profitable, and can’t be (while it is responsible for returee pensions). I’d say bankruptcy is the only way. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 30, 2009, 10:23pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/52 "2009-03-30T22:23:50Z")
> [@Sam\_Stone](#): > > To give you an example of how completely wrong this is, please consider this: The U.S. has almost completely free trade within its borders, and yet U.S. workers make very different amounts of pay. Ruminate on why that might be, then apply it to global free trade and see if you can spot the flaw in your thinking. Wages for hourly workers has been on a decline that just happens to coincide with NAFTA. Profits have gone up at a rapid rate during that time. Wages at the top (financials for instance) have skewed the real rates. Engineering,programming and technical work have dropped dramatically. You are totally wrong to dismiss it as the biggest factor in wage drops. Indian Engineers are working for 1/3 our rates. Work is being shipped there and disappearing here. See if you can spot the info that refutes your stubborn wrong stance. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [March 30, 2009, 11:30pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/53 "2009-03-30T23:30:03Z")
> [@gonzomax](#): > > Wages for hourly workers has been on a decline that just happens to coincide with NAFTA. Profits have gone up at a rapid rate during that time. Wages at the top (financials for instance) have skewed the real rates. Engineering,programming and technical work have dropped dramatically. You are totally wrong to dismiss it as the biggest factor in wage drops. Indian Engineers are working for 1/3 our rates. Work is being shipped there and disappearing here. See if you can spot the info that refutes your stubborn wrong stance. What the hell does India have to do with NAFTA? ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [March 30, 2009, 11:46pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/54 "2009-03-30T23:46:02Z")
> [@RickJay](#): > > What the hell does India have to do with NAFTA? There is a certain irony in how that slip illustrates what the real beef is. It is not NAFTA. It is the simple fact that NAFTA or no NAFTA the world is a smaller and more entangled place. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [March 31, 2009, 4:11am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/55 "2009-03-31T04:11:28Z")
And what to make of [this](http://www.cnbc.com/id/29960093)? > [@](#): > > Fritz Henderson said that because of greater demands from the Obama administration to restructure, GM [GM 2.70 -0.92 (-25.41%)] is considering the bankruptcy option. … Henderson told reporters that the company would still prefer to restructure outside of court, but the level of support Washington is offering would help the company quickly restructure through bankruptcy. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [March 31, 2009, 4:34am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/56 "2009-03-31T04:34:29Z")
> [@DSeid](#): > > There is a certain irony in how that slip illustrates what the real beef is. It is not NAFTA. It is the simple fact that NAFTA or no NAFTA the world is a smaller and more entangled place. But one way or another there’s no going back. You can either embrace it and make it work for you… or slip into poverty. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [March 31, 2009, 5:34am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/57 "2009-03-31T05:34:47Z")
> [@DSeid](#): > > And what to make of [this](http://www.cnbc.com/id/29960093)? I heard this on the radio today. I don’t know who said it but it was in conjunction with Wagoner’s voluntary firing. My take on it is that Wagoner will be replaced with a union friendly CEO. The goal will be to stay out of bancruptcy and in doing so keep the courts from disolving labor contracts. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 31, 2009, 5:51am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/58 "2009-03-31T05:51:46Z")
Does anyone else not see the sheer arrogance of the administration over this? It’s one thing to demand a failed CEO step down, but it’s quite another to inject your own economic team into GM’s boardroom and start telling them how to run their business: > [@Obama](#): > > In this context, my administration will offer General Motors adequate working capital over the next 60 days. During this time, my team will be working closely with GM to produce a better business plan. > > They must ask themselves: have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets or are they still saddled with so much debt that they can’t make future investments? And above all, have they created a credible model for how to not only survive, but succeed in this competitive global market? No, I’ll be they’ve NEVER asked themselves, “have we consolidated enough unprofitable brands?” I mean hell, who would have thought of that? And what’s this business plan thing he mentioned? Good thing Obama’s on the job! His economic team’s going to march right into Detroit and tell these boys how to make cars. Does he not realize that GM already hires top notch economists, and very sophisticated lawyers and accountants and comptrollers and all sorts of highly talented technical people who do forecasting and financial management and all the rest? Does he really think he can just march his team in there, and start making better decisions about running a car company than the people who have been doing it for for decades? GM’s problems are a lot bigger than just getting the right ‘team’ into place. It is stuck between a financial rock and a hard place, and no amount of brilliant Obama men can change that, clever as they may be. What’s going to happen here is that GM is going to be broken into a ‘Good GM’ and a ‘Bad GM’. The good GM is, well, all the good stuff GM does. The Bad GM is the all the bad stuff. Good GM gets to live. Bad GM is getting parted out. There, wasn’t that simple? Why didn’t GM do that before? They didn’t do it before because GM couldn’t eat the eleventy billion dollar loss that will result when half the company is sold off, along with its liabilities, for pennies. Good thing the taxpayer has deep pockets. Hell, this business stuff is simple. Just take any company, split it into good and bad parts, and sell off the bad. Profit! And really, who wouldn’t want to buy the bad half of a company? ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [March 31, 2009, 5:56am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/59 "2009-03-31T05:56:26Z")
> [@Sam Stone](#): > > Does he not realize that GM already hires top notch economists, and very sophisticated lawyers and accountants and comptrollers and all sorts of highly talented technical people who do forecasting and financial management and all the rest? Are we supposed to be impressed by this? If all these GM people are so top notch and sophisticated and highly talented, how’d they put the company so far up shit creek? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 31, 2009, 6:04am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/60 "2009-03-31T06:04:42Z")
When GM was making SUVs and vans they were making huge profits. They were not making vehicles that people did not want. They were making exactly what they wanted. They were very successful. To say they were not successful or doing well for decades is bull. GM is a fine example of what is wrong with capitalism. The management that would put money into products for the future would be fired. They have to pay dividends and show profits to keep their jobs once a year. Then they are rewarded with huge salaries and bonuses. To defray profits to build for the future would make you unemployed. They are not stupid. They knew damn well the big car age would end. But they just kept making tons of money. They moved factories abroad, cut labor and minted money. They could not resist short term huge profits . They have huge bank accounts to show for it. Waggoner walks off with 23 million dollar package. [Previous page](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240.md?page=2) [Next page](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240.md?page=4)