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 GM, Ford, Chrysler CEO Jobs May Hinge on Bailout Plan (Update3) By Jeff Green Dec. 1 (Bloomberg) -- General Motors Corp. Chief Executive Officer Rick Wagoner and his counterparts at Ford Motor Co. and Chrysler LLC will put their jobs on the line this week when they try to convince Congress they can save their companies. U.S. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Nov. 21 criticized Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli for being unprepared after two days of Congressional hearings failed to convince lawmakers the automakers should get $25 billion to avoid an industry collapse. Congress ordered that new plans be presented tomorrow. "Reid and Pelosi gave them a pretty clear plan for what they expect, and their focus had better be on coming in with a solid plan and looking contrite," said Clint Currie, a Washington-based transportation analyst at Stanford Group. "If I had to guess, I'd say top management is gone, I don't think they can survive this situation." GM's board met in Detroit to consider the rescue plan that may determine Wagoner's fate. The directors started reviewing the automaker's proposals yesterday in a 10-hour meeting and will continue today, people familiar with the plans said. GM rose 24 cents, or 4.6 percent, to $5.48 at 10:02 a.m. in New York Stock Exchange composite trading. Ford rose 25 cents, or 9.3 percent, to $2.94. Board members are keeping open the option of filing for Chapter 11 bankruptcy protection if Congress refuses funding, the Wall Street Journal reported. In such a move, Wagoner would probably lose his job, the newspaper said. Public Pressure While Republican detractors such as Senator Richard Shelby from Alabama have said the auto chiefs were "arrogant" and that management changes might be needed, neither the government nor GM's board has yet signaled Wagoner will need to leave to get an agreement, people familiar with those discussions said. So far, the public pressure for changing management, as the government did in the bailout of mortgage lenders Fannie Mae and Freddie Mac and insurer American International Group Inc., has come mostly from outside critics and Republican lawmakers who oppose the automaker bailout. The auto chiefs weren't directly threatened with removal during the hearings two weeks ago. Still, Democratic Senator Christopher J. Dodd, chairman of the Senate Banking Committee, said Nov. 28 that Congress may demand executive changes from auto companies as part of the bailout. 'Writing a Check' "Certainly I would never support writing a check to them without conditionality," Dodd said during an interview on PBS's Charlie Rose show, when asked if he might demand executive changes. The U.S. didn't require management changes in the bailout last week of Citigroup Inc. and other banks' executives have kept jobs after getting bailout money. Wagoner, head of the biggest U.S. automaker and the executive with the longest tenure of the three executives, has borne the brunt of criticism. "Rick Wagoner does not deserve to be the head of GM," said Maryann Keller, an independent automotive analyst and consultant in Greenwich, Connecticut. "I don't know that Congress could make that decision, but Wagoner has evidenced so many times that it's a day late and a dollar short with this guy." A GM spokesman, Steve Harris, declined to comment on what may be included in the Detroit-based automaker's plan or the board discussions. Ford and Chrysler said last week that they also would present plans to prove their future viability and detail their use of the loans. Debt Swap "Chrysler LLC is fine-tuning its original plan to meet the recent request from Congressional leadership, leading up to Tuesday's submission," Chrysler's Lori McTavish, a spokeswoman, said in an e-mailed statement last night. Mark Truby, a Ford spokesman, wouldn't comment on specifics of Ford's plan to Congress. Ford said today it may sell its Volvo unit as part of moves to strengthen its balance sheet during a global auto-sales decline and economic slowdown. The Senate is scheduled to conduct a hearing Dec. 4 and the House will follow on Dec. 5 before a possible vote the week of Dec. 8. GM wants to cut debt -- probably through an exchange with current debt holders for either debt, equity or a combination -- and change union rules that pay workers when their plants are closed as part of an effort to ensure its future viability, people familiar with the plan said last week. The largest U.S. automaker also may ask to delay a $7 billion payment to a union retiree health-care fund and drop more brands, said the people. Life Support Pelosi and Reid told the automakers in a Nov. 21 letter that they must provide "a forthright, documented assessment" of their operating cash positions, short-term liquidity needs "and how they will meet the financing needs associated with the plan to ensure the companies' long-term viability." "It shouldn't come as a surprise that the companies will have to show that the loans will be repaid and in three to five years the companies will have to be profitable," said former Michigan Governor Jim Blanchard, who worked on a federal loan program for Chrysler LLC in the late 1970s. "What Congress really wants to insist on is a realistic plan for payment of loans and a viable path to profitability," Blanchard said. Wagoner said during hearings that automakers would like action before President-elect Barack Obama takes over, because a global credit crunch that has slammed sales in the U.S. is spreading to global auto markets. "A bailout is more like putting someone on life support when what they really need is a new heart," said Bill George, former CEO of medical-devices maker Medtronic Inc. and professor of management practices at Harvard Business School. "The only way to save GM is a massive restructuring, to tear the company in half and make it much smaller." At the very least, Obama should appoint an "auto czar" to oversee the way the money is used, George said. "GM needs a new management, and maybe a new headquarters city," he said. "It's got to have a different culture. In fairness to Rick Wagoner, he was dealt a bad hand." To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Last Updated: December 1, 2008 10:13 EST |
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