Wagoner 'sacrificed himself for GM's survival'

Washington: It was a sacrifice on the altar of political expediency.

There was Rick Wagoner, chairman and chief executive of century-old General Motors, struggling to make a go of it in a collapsed economy. Holding the knife was a young US president, newly elected and under tremendous pressure to placate a restive public demanding corporate capital punishment.

The public's anger was occasioned by rapidly rising unemployment, lost pension and medical benefits, rising home foreclosures - and news that leaders of financial institutions largely responsible for their suffering were taking massive bonuses after demanding and receiving hundreds of billions in taxpayer dollars to help keep their businesses alive.

Wagoner was the perfect sacrificial lamb. Reserved to the point of shyness, he seemed aloof. Under his leadership since 2000, GM lost $82 billion (Dh301.2 billion). His company, which once had commanded as much as 60 per cent in a US market uncontested by foreign rivals, was now fighting to hold 21.1 per cent.

And after receiving $13.4 billion in emergency federal loans last year, here was GM, along with an even more hapless Chrysler, collectively asking to borrow $21.6 billion more.

President Barack Obama was inclined to extend and expand the loans to the automobile companies, which were fast running out of cash and rolling toward bankruptcy - a fate Obama and the car people wanted to avoid, or, at least, to control.

However, giving the Detroit car companies the money without satisfying the public's lust for blood was a political no-no. Somebody had to go. Sources said Wagoner effectively volunteered.

There was no Obama-Wagoner angst, as suggested in the news. Both men understood the dire nature of the political situation.

Wagoner did not want to endanger GM's chances of getting its share of the additional taxpayer loan money, about $16.6 billion.

Obama reportedly did not want to risk further public outrage in the wake of the outcry over executives at the stumbling insurance giant, American International Group, taking $165 million in bonuses after receiving billions in taxpayer bailouts.

After being assured that "something was in it for GM" - expressly, a loan extension - "Rick agreed to go," one source said.

Other sources point to Wagoner's interim replacements. They include Kent Kresa, 71, the new GM chairman, a former Northrop Grumman chief executive who has been on the GM board since 2003.

"He was one of Rick's biggest supporters on the board," one source said.

Then there is the hard-charging Fritz Henderson, the GM executive who, under Wagoner's tutelage, reorganised and streamlined GM's European operations and successfully integrated GM's once far-flung, often redundant vehicle design and development operations into a global unit.

Wagoner brought Henderson back to the United States in 2006 to help do for the company's North American operations what he had done in Europe and, earlier, what he had done for GM's South American businesses. Henderson now moves into position as GM's president and chief executive from being company vice chairman and chief financial officer.

Corporate insiders say Wagoner's departure and his replacement by Kresa and Henderson is more like an orderly leadership succession than it is a corporate reshuffling, one that had been planned all along. Henderson long had been touted as Wagoner's likely successor.

Meanwhile, the truth is that it matters not how much money is made available to the car companies if consumers remain on strike and stay away from new-car showrooms. That remains the biggest problem for automakers.

That being the case, GM and Ford have to be congratulated for following Hyundai and offering new versions of 'got-your-back' coverage for consumers who have resisted buying a new car or truck because they have been worried about losing jobs or pay.

- Los Angeles Times-Washington Post News Service