WASHINGTON General Motors Corp Chief Executive Rick Wagoner resigned under pressure from the Obama administration on Sunday as the government prepared to announce a second bailout for the company and its smaller rival Chrysler LLC.
Wagoner, a career GM executive and CEO since 2000, is stepping down as the top U.S. automaker struggles with a recession-fueled sales implosion that has pushed GM and many of its suppliers and dealers to the brink of failure.
"For them to change captains right in the middle of the rapids is not something GM would have done, but now (President Barack) Obama or (Treasury Secretary Timothy) Geithner can say, we've asked them to make the ultimate sacrifice," said Aaron Bragman, an analyst with IHS Global Insight.
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.
GM would not confirm the decision. A White House official, who spoke anonymously because the resignation had not been announced, said it was done at the request of the administration.
NO WORD ON SUCCESSOR
There was no word from the government or others with knowledge of the situation on the timing of Wagoner's departure or who would replace him.
Fritz Henderson, GM's chief operating officer, is the No. 2 executive at the automaker and widely considered to the leading internal candidate as Wagoner's successor.
Obama last week cited mismanagement "over the years" for some of the auto industry's severe financial problems, a point that stung Wagoner since his counterparts at Ford Motor Co, Alan Mulally, and Chrysler, Bob Nardelli, are relative newcomers brought in from outside the industry.
GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM has lost about 95 percent of its value since Wagoner took over as CEO.
Wagoner was in Washington on Friday to meet with the White House-appointed task force on auto restructuring. Obama is expected to announce that panel's recommendations on Monday.
Together, GM and Chrysler have asked for another $22 billion in government loans to ride out the weakest market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help.
Obama said earlier Sunday that GM and Chrysler have not done enough to save themselves since receiving a $17.4 billion bailout in December.
"They're not there yet," Obama said in a taped interview on the CBS-TV news program "Face The Nation."
GM and Chrysler have run through most of the initial bailout and are at risk of bankruptcy without immediate help.
Chrysler, which is also pushing to complete a tie-up with Italy's Fiat SpA, has said it needs additional funding as soon as Tuesday to avoid a cash crisis.
But neither automaker has finished the cost-cutting overhaul dictated by the terms of the auto industry bailout launched by the Bush administration that set a deadline of March 31 for determining whether the companies can be saved.
Analysts say that presents a dilemma for the Obama administration. GM and Chrysler employ almost 160,000 U.S. workers and allowing the automakers to fail would cause widespread hardship, especially in the industrial-belt Midwest, at a time when the economy remains mired in recession.
As confidence has grown that the White House will not push the car companies into bankruptcy, it has also become more difficult to clinch cost-saving deals both GM and Chrysler need to reach with creditors and the United Auto Workers union.
Obama said the automakers had more work to do to win concessions from creditors, labor and other groups.
"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," Obama said, stressing that all parties must sacrifice.
GM and Chrysler have won pending contract concessions from the United Auto Workers intended to bring factory labor costs in line with those of Japanese automakers led by Toyota Motor Corp that have operations in the United States.
But GM and Chrysler have failed to meet other targets set for them by the government in December. In particular, talks intended to cut debt at both companies have failed to produce results over the past six weeks.
(Additional reporting by Jui Chakravorty Das in New York, David Alexander in Washington and David Bailey in Detroit; Editing by Maureen Bavdek and Chris Wilson.)