He liked engineering Detroit so much he bought the industry.
What does it mean if a President can force the resignation of a CEO that still answers to shareholders?
The rationale was drawn from the infinite corporate experience that President Obama brings to the table ...
[Wagoner] is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years.
In other auto news: American hybrid sales fall off a cliff
Only hope for change is the Mid-Terms. 18 months to go. Be strong.
This will be the new official powers of the Systemic Risk Regulator, they are just trying it out via the "Auto Task Force" using the bailout cash first.
Kinda a trial run on how much they can get away with as an "Investor", that is the procedure they are test driving now, but they know that they cannot "bailout" everyone. The citizens are at the end with tolerance for this.
So without some body designed to identify "Too Big to Fail" systemic corporations ( which is the job for the New Systemic Risk Regulator ) they cannot use bailouts in the future. The new procedure will be much less covert.
Oh it will be all innocent like and called "Investments in America's Manufacturing Future" or some such nonsense.
The end result will be creeping socialism, because if you think for one minute that the US financial system is not nationalized you have not been paying attention, each Treasury action places more and more of the banks under the control via the "Investment" made to date.
Barney Frank Said it all... regarding AIG ... "we own it and we should exert our control as the owners" note that the US Taxpayers do not own it, but the Congress and Administration own it.
They also effectively own CitiGroup, so far the rest are protected. Yet with Chrysler they will prove that even Private Corporations can be "Too Big" so being non-public will not be a shield from regulation.
All this pales against the EPA and Energy Department Plans.
In 1900 the Carriage industry was the largest mass production industry the world had ever seen. It is estimated that there were 30,000 carriage manufacturers both big and small in North America.
Companies like Studebaker, Durant Dort and Sears Robuck produced in excess of 100,000 carriages each a year. Studebaker was so advanced that when the US government wanted 300 heavy army wagons for the spanish American war, Studebaker completed it in 24 hours!
By 1910 the Carriage industry faced serious competition from the automobile industry. By 1920 the carriage industry had collapsed. Hundreds of thousands of jobs were lost. Not just in manufacturing, but in harness making, livery stable workers, manure cleaners, horse handlers.
Where did all the jobs go? Didn't the government care about its citizens? Where were the subsidies? Where was the stimulus? Where were the trade barriors to protect domestic jobs?
The carriage industry wanted protection. They did not get it. Can you imagin what our history would have been if North America was forced to use carriages in order to protect jobs?
The free market system isn't kind or gentle but it is good. It has created all the progress we enjoy today and I hope it is given a chance to guide our future. If it is not, our generation will be looked down on as the greatest fools in history, driving our Congress / Parliament approved Chevy Lada's while the rest of the world drives us into the ground.
Rob: unlike carriages there is no alternative to cars in the offing.
The domestic makers are being killed off by intransigent unions that over the past fifty years emasculated the mangement ranks. Wagoner is the perfect example of such emasculation. Right up to the end he was trying to defend the status quo and get along.
It is the union movement not the auto sector that needs to - and is going to - go the way of the buggywhip.
Nonetheless, Gord - the replacement of a CEO by a sitting President should be a development that prompts every American to throw up a little in their mouth.
I watched Ed Liddy from AIG in the House "hearing". He took so much crap from odious people like Barney Frank and Maxine Waters (who automatically lowers the average IQ in any room just be entering it), it's a wonder he didn't walk out. I don't blame Wagoner for bailing; for the $1 a year he gets paid, it's not worth the aggravation. He'll make more money wherever he winds up (and he'll find a job - you don't rise to the top of GM without having some skills), and he'll be out of the public eye.
Frank is the worst of the bunch, though. When Liddy read the letter detailing death threats to the bonus babies, and their wives and kids, and said he didn't want to make that list public, Frank just pooh-poohed him. "Oh, we get those all the time" the corpulent queen lisped. Yeah, and I bet the FBI investigates threats against Congress members; bankers, not so much.
Amen, Kevin. A part of me hoped to learn that every employee at AIG had tendered their resignation the morning after.
“The task force.., said Chrysler's best hope for revival lies in a proposed partnership with Italy's Fiat SpA.”
I see Fiat is already in partnership some of the world’s other automotive powerhouses: Serbia, Russia, Bulgaria, Turkey, South Africa, Ethiopia, Egypt, India and Sri Lanka.
This merger with the Italians should have happened sooner. All that unpleasantness with Mrs. Robison could have been avoided if Ben drove a Hemi Road Runner.
The firing (asking) for Wagoners resignation is unconstitutional. WTF does a Bond Holder (lender) have to do with ownership, they may call in the loan and force liquidation, but seizing control of a publicly traded company is not going to resonate in the economy. Who is stupid enough to risk thier Money when the US Government is behaving like a satellite of the Former USSR?
The hot issue:
The Shareholders of GM must have the right to petition the Courts for damages. That is suing the EPA & the State of California for co2 regulations. This action by Obama is an act of intimidation, in making GM agree not to sue as a condition of funding. So said Barbara Boxer.
I hear what you're saying, Kate, but my own views still lean closer to Gord's. It seems clear that Rick Wagoner was an absolute disaster as CEO of GM. The correct course of action at the start of his tenure would have been to take a firm stance and say to all, "We have become a massive old age health care rest home provider with a small loss-making automobile manufacturing division" (to borrow a line from Mark Steyn).
But instead, he went on & on & on with the status quo. Some have suggested that he, the head of the UAW, and several Michigan and federal politicians have all been in cahoots for some time.
I wish he had resigned on his own a long time ago. He has not. I desperately fear that Obama will now engineer a Democrat lackey to take over but who knows.
So I agree with you about the severe oddness of an American president interfering with a private enterprise CEO but then we'd probably both agree that no bailout with public funds should have occurred in the first place!
I did my two cents' worth on Barack Hugo Chavez Obama's latest draconian move to dictate to the private sector, control business leaders' lives and impose state control of the means of production...
http://thecanadiansentinel.blogspot.com/2009/03/obama-makes-gm-boss-step-down.html
National Socialism's a [censored by liberal fascists, HRC agents wearing brown shirts & jackboots sent to CS's door to deliver stern "lecture" (warning)]...
Obama just blew it. The facade is OVER. He actually believes that he is the ONE. Heh you, GM guy, on your KNEES. This is insane......... I'm digging in, the TOTUS is drunk on power, and oh, Acorn wants your car and your kids. Lunacy...... barry could not cut this man's toenails in a den for men, I don't know what I am saying, because nothing makes sense anymore. Hell with it, I gonna learn how to say, brother can you spare a dime in Mandarin and go from there. I just can't get the sound of his voice out of my head. Can't anybody stop this..........Nightmare.
I have mixed feelings about this.
The auto industry leaders have failed on so many levels, so profoundly, and for so long, that it's hard to find the slightest ounce of sympathy for them. At the end of the day they will all end up extremely rich and with new jobs. How many millions who have lost their jobs and homes can you say the same for.
Obama won't be around forever. America won't turn communist that easily. But, maybe he can serve the purpose of cracking a few hard nuts.
Right now, so called "conservatives" in the US are too involved in social politics and laying blame for their failure to do anything to help the us. Witness the pathetic "budget" they presented a couple of days ago.
http://thehill.com/leading-the-news/house-gop-goes-from-united-to-fractured-2009-03-28.html
So, in the absence of any coherent opposition, Obama will get his way. For now.
But as discussed previously here, and in many other places, maybe it's really time for a new version of Conservatism in the US, with a different brand name.
I don't care if this CEO:
1) invested in cars for monkeys,
2) let homer simpson design the next family car,
3) paid himself a bonus of a billions of dollars,
4) hired interns on their ability to ......
5) watched CBC
I don't care if the company accepted bailout money!
It is absolutely NOT the duty of any politician to dictate who is charge of private companies.
It is absolutely NOT the duty of any politican to determine what individual private companies should produce or how.
This isn't the road to fascism, this IS fascism (i.e. national corporate systems).
So, for all the lefties out there, are you surprised yet that this has come from your side of the fence yet?? Or is the Bush Bunch still manipulating this (ahhh Karl Rove, you magnificent bastard)
Next thing you know, Obama is going to order Detroit to design a car for the "Volk".
I don't understand the real circumstances or the real story yet but I do know that everyone (investers, engineers, etc. - the only guys that like him are probably the unions) has been trying to get rid of Wagoner for a long time - he's a politician not a leader and so he has been able to make deals to stay on - he's also made a fortune. He is considered responsible for destroying GM. He has crashed the stock over the last 10 years to being basically a couple of bucks from something near 100 bucks.
No one is going to lend money to GM with that guy in charge - their bonds are junk. The US government has to look at it the same way - if GM wants money then ditch the clown and bring in someone with a proven track record.
Concerning some comments on the carriage industry: The biggest carriage maker in the commonwealth and world (outside of the US) was McLaughlin based out of Oshawa (initially from Enniskillen which is a couple of miles north of Oshawa). McLaughlin decided that he needed to move into the motor car industry and started designing a car. His engine designer got sick and couldn't get the engine completed. McLaughlin had met Durant from Buick (who took over from David Buick) earlier and struck up a deal for Buick to supply engines for McLaughlin cars (now know as McLaughlin-Buick cars). McLaughlin built most of the car except for the engine and engine support which was imported from Detroit. In 1918 McLaughlin decided to merge with the new GM - and voila - GM Canada was born. That's why everything - the McLaughlin mansion - the McLaughlin musem - the McLauglin art gallery - every second street in Oshawa - and even things in Toronto like the McLaughlin Planetarium - are named McLaughlin.
even in here profit is a dirty word. - the high margin vehicles are panned. unions are only mentioned in passing.
http://online.wsj.com/public/resources/documents/GM-Viability-Assessment-20090330.pdf
check out the full length feature here.
http://jaykeating.wordpress.com/2009/03/20/1214/
tipping over and not in slowmo.
Obama and company just sent a message to the rest of private industry in the US. Today a large number of company CEOs will be discussing their options with their Board of Directors regarding future survival.
Considerations may include moving their operations out of the US. That will certainly help the unemployment numbers down the road.
They must do what they can to protect the shareholders investment before Obama "makes them an offer they can't refuse".
Is it any wonder that, when one puts the word "Obama" into an anagram software, the following is immediately evident:
OBAMA >>>> A A MOB
Waggoner may have been a schmuck but that's not the point. His successor will be a political appointment, and will do what obozo wants. With each subsequent action like this - there will be more - the appointee will be more connected and democrat compliant.
Nobody with any conservative ideals should be happy about this.
Watch out for this to trigger derivative swaps on the GM bonds...
GM has $1T out in bonds. Ouch.
Re: Next thing you know, Obama is going to order Detroit to design a car for the "Volk".
Posted by: tim in vermont at March 30, 2009 7:23 AM
Maybe he's trying to prove he can do a better job than the originator of the "Volkswagen". He's already got the design for the hoodornament.
1938 "Strength through Joy" = Volkswagen
2009 "Hope and Change" = GM Folkswagon .
Think about it!!
Ooh, can't wait for the markets to open today - another bloodbath?
"What does it mean if a President can force the resignation of a CEO that still answers to shareholders?"
Fascism. That's what.
How d'ya like that, Lefties? Bary's the friggin' picture next to the word "fascist" in the dictionary. Awesome!
It was within GM and Wagoner's power to avoid Owe's dictates. Don't take taxpayer's money and Owe can't touch you. It is within the power of every other CEO in the States to avoid Wagoner's fate. Don't accept taxpayers money. Had this been Bush disposing of the incompetent Wagoner we would all be cheering him but because it is Owe doing the dirty work we are pillorying him.
Why should it force nausea? That should have happened with the bailout.
If the government is going to do this then this is not a surprising move.
If this scares businesses into managing themselves so they don't come to the trough then I think that is a good thing. The least desirabe result would be failing businesses able to pull on political connections to get tax money so that management can stay in place.
Next issue, bondholders take a haircut, wages adjusted (done but not enough) and the real hairy one, pensioners benefits are cut to 85% of original value. This would have been done by a bankruptcy court, but the credit markets made that impossible.
Don't defend management, decry the fact that management let government into the woodshed in the first place, the rest are foreseeable consequences of the first decision.
Joe at 8:43 AM. Agree fully.
Some will want to spin this as "Obama chasing future free enterprise success stories out of the US.".
I'd spin it as "perhaps the fear of being Obamacized will put a cap on the corruption inherent to our big business elite'.
Perhaps.
One thing I am sure of. Politically this will work well for Obama initially.
I remember reading about a year ago that Ford would be the survivor because of the stabilizing influence of the Ford family. It seemed lame at the time but looks true now.
Lori, you are correct. But now the problem is completely his. O has provided the money and now will hand pick a CEO. The problems they face arent new and arent unknown.
Just like Geithner's pan is really Paulson's plan, the new GM CEO will implement Wagoners plan, maybe a little faster who knows. GM's issues are structural (pension costs, wage costs, debt servicing costs) and these issues prevent or hamper the real business, designing and building great vehicles.
My concern was and is, so if GM and Chrysler get help and Ford goes without assistance, what prce do the suppliers (capital and labour) and management face. Without consequence why shouldnt Ford have accepted money as well.
During the depression FDR ensured that government workers hired in the workfare projects were paid LESS than private sector workers so that they would move back to the private sector as demand picked up.
Wagoner was a decent man, and was moving GM in the right direction.....just too slow. GM culture needs to change, but the long run choice for that wont be the government it will need to come from the private shareholders and bondholders.
But this is Obama's problem now...absolute and complete, he will wear its success or failure.
Sorry I went to bed after my last post.
Wagoner is a symptom not the cause of GM's demise. (a demise that will happen sooner or later just like all of the companies that made up British leyland).
I a not sure whether this is the first time a POTUS has ever demanded a CEO resign publically. I am sure it has happened privately. As for whether a supposedly passive investor like a bondholder can exert power of a companies leadership, the answer is of course - the bond market told Jean Chretien and Paul Martin to clean up their spending or they wouldn't buy their bonds. In this case the bond holder representative is the TOTUS.
It will be interesting to see how the next CEO is chosen. If the dems meddle or it is someone cut from the same soiled cloth as wagoner, then GM may well become an organ of the Democratic party(perhaps it already is as someone above has mused - it would not surprise me that that is the case) and see it used as a milk cow for the UAW woth kickbacks the Dem party.
"Ooh, can't wait for the markets to open today - another bloodbath?"
DJIA down 202.63 @ 7:39 MDT
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini"
(publiceye)
O = Il Duce.
Berlusconi = Il Duce, cosi fan tutti.
"Mussolini's heirs merge with Silvio Berlusconi's Forza Italia party - Telegraph.co.uk"
somewhat alarming...
It appears that "zero" has gotten his way (or the highway) with the GM executives. how does it play out for the next group of bailouts? everyone asking for a bailout, must cave in to "zero's" demands for a fresh face of his choosing at the top?
what does it take for the media to call this for what it is? oh yeah, they're next for bailouts... expect, "crickets".
assholes. all.
This is right out of the NDP playbook. For those of us from BC and Ontario, we've seen this before.
Never thought I would see it out of a US president though.
The US is in deep deep do-do.
Notwithstanding the fascist activity of the federal DemocRat party, I firmly believe it is all moot anyway. The Big Three are f-ed and have been for some time now, maybe as much as 15 years.
But even the non-bailout Japanese companies are going to be up against it quite soon. The current just-in-time manufacturing model is bumping up against the Next Big Thing in making stuff, the cloud.
Enter Tata Motors. Mr. Tata is making cars for $2500 bucks in India.
If there was ever a place that's a nightmare for making stuff, India is it. "Close Is Good Enough" should be the motto on their flag, and I have that from an Indian guy who made a buttload of rupees in manufacturing in India. Steam engines. They still use them. Socialism in action.
In this insalubrious manufacturing environment, Mr. Tata can punch out cars for twenty five hundred bucks. I can't even buy a turn-key crate engine for that here in super-duper precision manufacturing land, he's doing the whole car.
How? Cheap labor isn't it, because even the Chicoms can't match his price. Its the way he's got the business set up. Its a cloud. Or maybe an ant hill.
There's no inventory, each unit is custom, all the parts are ordered from whoever can drop it on his doorstep the cheapest this week, there's no dealerships, there's no shipping because of local assembly, all driven from the internet. Fascinating stuff.
//phantomsoapbox.blogspot.com/2009/03/somebody-agrees-with-phantom.html
Another example of this ant-hill kind of thing is the sand rail industry in California, or the custom chopper business. These are the same idea as Tata, just with American level regulations and wages, making very high performance vehicles. Still, if you don't order all the super-duper killer stuff, you can get a custom four seater sand rail cheaper than a Honda. Watch the prices plummet in our new capitalism-unfriendly environment too.
Detroit is doomed, Tokyo won't be far behind, and the current government methods for regulating and taxing will come apart in the next twenty years. Bary can nationalize to his heart's content, those wheels are coming off and staying off. Even an ant eater can't get -all- the ants.
I prophesy it. I also prophesy a return to manufacturing in Ontario. By about a million guys churning stuff out in their garage, no more big smokestacks. That's the real power-to-the-people.
I don't think you can blame the Big 3 for what they built. The public wanted SUV's and trucks and that is what they built. They made more money on trucks than small cars. All companies build these vehicles now but the truck is working America. We do not drive around with a cow in the trunk and a goat in the back seat. Last I heard Prius sales were down 30% and I ainta buyin' one. We won't run out of used cars in my lifetime so BAMBAM ain't selling me crap all.
Ford doesn't need bailout because they have a plant in South America that is the future and the USA is pretty much dead for competition. Would you buy a used car from Obama? At this point it would not surprise me if this were a shakedown Wagoner wouldn't play in.
"What does it mean if a President can force the resignation of a CEO that still answers to shareholders?"
It means the nation operates under the economic model of fascism.
This is an interesting confluence. It is also very dangerous. Generally, people being preoccupied, as they should be, with everyday living, don’t give it much thought.
The thing is that the management has driven the companies to the ground. That being said, it is difficult to know all about the problems due to the press that omits key events in any story.
One problem is clear even to the SFC*, though they don’t mind, it is the mismanagement of unions by the management of the corporations. If you give all you are asked for and have nothing left, what do you do, go to the gobmint for money?
As Kate pointed out, it is not business of the president of US to run management of companies, unless of course he is following SFC ideology that tells him, that he can do anything he wants, never mind the constitution, never mind the law.
Current president seems to think that the constitution is what he sez it is and the same with law. Though so far very few in the corridors of power had the courage to tell the president, it ain’t so.
*Socialist, Fascist, Communist
Obama knows that he is going to double the price of gas, so those big vehicles will be losers. GM didn't factor the fact that Obama was going to be president into their vehicle plans. For that reason, Wagoner had to go.
Kate is providing a very valuable service here. A sort of 'clearing house' of ideas and thought and rational. (This thread has certainly orientated my thoughts on the issue - any one person will NEVER know everything. The right answers are obtained by asking the pertinent questions) Too bad the rest of the world didn't operate like sda.
Yes, let this be a lesson for others thinking of accepting "bailout" money from Politicians.
Yes, GM is probably a special case basket case but where will the Obama 'directives' strike next ?! Your work place ? Your lifestyle ? Your morality ?
The "Big" Three have been behind the curve for decades - only inertia, buying habits kept the music going for as long as it did.
Mark Steyn summed it up perfectly; "a massive old age health care rest home provider with a small loss-making automobile manufacturing division."
Gord Tulk,
I think you miss my point about the carriage industry. The point is that commercial progress does not come from government, it comes from private industry making good decisions and prosering or dying if they make bad decisions as they navigate the market.
When governments intervene we get overly powerful unions, over-reaching regulations, and political policy decisions that trump market decisions.
If we had government like we do now a hundred years ago we would have no domestic carriage industry and no auto industry. It would have been the worst of both worlds.
Fascism indeed. My industry, extremely capital intense and critical to North Amerian commerce, refuses to accept government money every and only reluctantly enters into public/private partnerships because of past experience with government oversight and strings.
Think positive thoughts in the general direction of Detroit. Help they needed, not this.
Two important trends have caused the problems for the American auto industry. I've noted previously that one problem is that people are hanging on to their cars longer, which depresses new car sales, thanks to improvement in quality.
But the other thing is the pension benefits. In 1960, average life expectancy for a man in the US was 69 years; he'd retire at 65 and draw a pension for four years. Now the average lifespan for a man is 75 years, and with the "30 and out" policy adopted in 1970, a person can retire at 55 and draw benefits for 20 years. And with health care costs outpacing the rate of inflation every year, the cost of insuring their retirees goes up every year. 30 and out, and increased health care benefits were part of the settlement after the nearly 3-month strike in 1970, a time when GM held 50% market share in the US, and executives feared an anti-trust suit. So they caved into the UAW, and Wagoner inherited their mess.
The oil spike last year didn't help, with Detroit's SUV/truck heavy product mix, but as Kate notes, no one is buying hybrids now. And, according to JD Power, the Malibu, Grand Prix, and Silverado all led their class in initial quality. For those who think "Japanese" is always better, it's interesting that Buick outpaces Acura - supposedly Honda's high end line - in initial quality. So I don't think the argument that GM builds shoddy cars holds water anymore.
Anyone for a Politically directed and manufactured Lada ? Or Trabant ?
http://www.youtube.com/watch?v=5B7H2sU2kF4
ron in kelowna asks: "where will the Obama 'directives' strike next ?! Your work place ? Your lifestyle ? Your morality ?"
The end result: RuhOllah O.
The Way? The shaming/coercion by using/deploying the State's weapons, e.g., the Green Ramadan of Earth Hour.
...-
"Ruhollah Khomeini - Life under Khomeini
In Iran, he is officially addressed as Imam rather than Ayatollah, ... the oppression by the "morality police" made life extremely difficult for those ...
www.spiritus-temporis.com/ruhollah-khomeini/life-under-khomeini.html
An interesting perspective on BNN this morning about the automobile industry's impact on the Canadian economy.
Percentage of Canada's GDP: 1.6%
Employees: 250,000
Canadian labour force: 16 million
Employees of Canadian industry as a fraction: One in 64.
"Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees."
Page 2 from a link to a link given above.
http://www.politico.com/news/stories/0309/20625_Page2.html
Bonuses that would have been paid to AIG executives had the free market model be followed and the company fell into bankruptcy: Zero dollars.
Obama's solution: extract 3 trillion from the American taxpayer, which allows $168 million in bonuses to be paid.
Who's responsible for the bonuses, ural?
Why is everybody down on the Wagoner? I've got friends who've owned that particular Jeep for 30 years and it's still on the road.
A 10% drop in hybrid sales doesn't look so bad considering that all U.S. auto manufacturers are seeing overall sales drops from 30-50%. http://is.gd/ihAq
In other news, Hummer sales are down 65% in 2009. http://is.gd/pAST
Next time do your homework please!