Ailing auto giant General Motors Corp.'s (GM) Board said Monday that chairman and chief executive officer Rick Wagoner is stepping down with immediate effect. Fritz Henderson, the company's president and chief operating officer, will succeed Wagoner as chief executive officer.
On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I step aside as CEO of GM, and so I have, Wagoner said in a statement.
Fritz Henderson is an excellent choice to be the next CEO of GM. Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM'ers worldwide to succeed, Wagoner added.
Wagoner, who joined GM in 1977, has served in several capacities in the U.S., Brazil and Europe. He was named president and Chief Executive Officer in 2000, and assumed the role of chairman in 2003. Henderson became GM's chief operating officer about a year ago, after a period as chief financial officer that began in January 2006.
Wagoner's ouster came just before President Barack Obama's updated rescue plan for GM, scheduled to be released on Monday. GM has already received $13.4 billion in loans from the government. The company almost ran out of capital towards the end of 2008 before it received the emergency loan from the government. Upon receiving the initial loan from the U.S. Treasury, GM was under a mandate to streamline and reorganize by March 31. As it became apparent that GM would not be able to meet that deadline, Wagoner's days became numbered - especially since the company said it now requires another $16.6 billion to continue to survive.
Additionally, investors were unhappy with Wagoner after the company posted losses in each of the last four years and the pressure intensified after the government bailout. GM posted losses of $82 billion in the past four years. Meanwhile, critics pointed to Wagoner's unwillingness to invest in more fuel-efficient vehicle while continuing to mass produce gas-guzzling trucks and SUVs.
However, by all means, Wagoner, who replaced Jack Smith as chief executive in 2000, made progress in fixing GM. He closed several plants, shed the unprofitable Oldsmobile brand and globalized the company's engineering, manufacturing and design to save billions. He also trimmed the company's U.S. work force to about 92,000 from 177,000.
The new chief executive Henderson has established himself as a GM turnaround specialist over the past ten years. He led a reorganization at GM's Asian operations, and in 2004, moved to Europe to accelerate a restructuring effort there. He also played a key role in the company's efforts to cut labor costs by negotiating new contracts with the United Auto Workers union.
During his tenure as GM's chief financial officer, Henderson was more direct, and offered more details than his predecessors about the company's problems and dismal financial results. Of late, Henderson was playing an active role in GM's current restructuring efforts and negotiations with government officials, union leaders and creditors to secure up to $30 billion in federal loans to avoid a bankruptcy.
Now, as the captain of the 'sinking ship', Henderson will have to deal with an array of problems, including GM's problematic relationship with its former parts unit, Delphi Corp. (DPHIQ.PK), which is now under bankruptcy-court protection.
Although Wagoner's resignation is a high-profile casualty due to the government intervention, the shake-up is seen as Obama administration's hard-nosed approach to save the company. Citing senior administration officials, reports said that GM would get enough government aid to restructure over the next 60 days. Another automaker Chrysler reportedly will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA (FIATY.PK). If Chrysler fails to reach a deal with Fiat or another partner, the government would not provide any further financing, likely sending the company into liquidation, a report said.
GM's Board said Monday in a statement that it awaiting further announcements by the President and the Task Force on Automotive Reconstruction. The Board also announced the appointment of Kent Kresa, chairman emeritus, Northrop Grumman Corp. (NOC), as interim non-executive chairman of the board. Kresa became a director of General Motors in 2003.
According to Kresa, the company's restructuring is likely to cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience.
The Board intends to work to nominate a slate of directors for the next annual meeting that will include a majority of new directors taking into account the addition of new directors, retirement, and decisions by individual directors not to stand for re-election, although the specific individuals who will be nominated or choose not to run or leave the board are not yet known, Kresa added.
GM closed Friday's trading at $3.62, up $0.21, on a volume of 32.31 million shares.
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