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GM CEO Out, Unions Still In?   March 29th, 2009
White House forces out GM's CEO in return for more bailout money       


More observations...

Headlines this afternoon indicate that GM CEO's Rick Wagoner has resigned at the White House's request. Will the White House also ask for unions to resign from GM? I suspect not.

One might wonder why...

Without fanfare, he [Wagoner] negotiated an historic agreement with the United Auto Workers to reduce the burden of pension and health care costs and to make its hourly labor costs more competitive.

He was also in the final stages of the consolidation of GM's North American operations after a century of balkanization. At last, what was then the world largest auto company would be able to leverage its global scale to become cost- and efficiency-competitive.

None of this was accomplished easily, or without the shedding of thousands of blue- and white-collar workers. But through it all, Wagoner retained the respect and loyalty of the vast majority of GM's enormous workforces.

What finally did Wagoner in was his misplaced respect for GM's traditions and his failure to foresee a spike in oil prices followed by the collapse of credit markets and the onrushing economic meltdown.

So it would seem that this CEO was respected by the people at his own company and made good accomplishments in improving the efficiency of the company. His error? Not anticipating a spike in oil prices or the collapse of credit markets??? Neither did anyone in government or most anywhere else!

And yet...

CEO Rick Wagoner is stepping down immediately, auto industry and White House sources told FOX Business on Sunday...

A White House official told FOX Business that Wagoner was asked by the Administration to step down as a precondition for the company to continue to get help with its restructuring.

Why was the White House insistent on getting rid of a CEO that was respected by his employers and had made the company more efficient and had experience negotiating significant concessions with the unions? After all:

A source told FOX Business that the Obama Administration is likely to set a hard deadline for GM and Chrysler to meet their restructuring goals, which include getting bondholders and the United Auto Workers union to agree to major concessions. If they don't meet those goals by the deadline, the source said, the auto makers would likely be allowed to enter into bankruptcy protection.

So, apparently, the administration is expecting GM to negotiate major concessions from the unions and has decided to make sure that the current CEO, with a history of negotiating such concessions, is sent packing? What is the logic behind this?

Last I heard--despite a massive federal loan/bailout--the U.S. Government was not a majority stockholder in GM. But it is dictating the operation of a private company? And the insinuation here is that Rick Wagoner was somehow part of the current problem when it would seem he has been part of the solution and could be key in future negotiations with the union.

I suppose more information or justifications could be forthcoming, but it would seem:
  1. This is part of getting revenge on the "bad CEO" so that the American public is somehow more tolerant of a continued bailout. "Yes, we're giving more of your money to GM... but, see, we fired the bad, rich CEO so that should make you happy."
  2. It gives the general impression to the public that the CEO was the problem that led to higher costs and keeps public scrutiny off the higher costs caused by the union.
  3. It gives the impression that something is different which can be used to try to justify why more money should be given to GM. Never mind that apparently a pretty effective CEO has been let go.
I'm suspicious of this turn of events. It seems to be making a bad guy out of someone that doesn't appear to me to be a bad guy. It appears to me to be the government meddling in the internal affairs of a company (granted, one that's sucking down massive amounts of public funds). And it seems to be the latest volley in the administration's war against CEOs in a growing list of industries. And despite all of this, GM presumably will get more money.

Wagoner was asked to resign by the White House as a condition for GM receiving more government funds. If Wagoner wanted to accept, he should have done so with his own condition that all union contracts be ripped up and GM be allowed to pay prevailing industry wages. After all, at least that would have given GM a meaningful shot at fixing its problems whereas Wagoner's departure seems to be style over substance. It doesn't really fix any problems but satisfies the thirst for blood some people have... and some of those blood-thirsty people appear to be in the administration.

    Update Next Day, 3/30/2009: The governor of Michigan is saying about the same thing--that Wagoner was a sacrificial lamb.

    Michigan Gov. Jennifer Granholm on Monday called the chairman and CEO of General Motors a "sacrificial lamb" after the White House asked Rick Wagoner to step down as a precondition for government aid.

    Interviewed Monday on NBC's "Today" show, Granholm noted that Wagoner has worked for GM for more than 30 years and was trying to turn the company around...

    U.S. Rep. Thad McCotter, R-Mich., also said Wagoner's resignation amounts to a "political offering."

    Sacrificial lambs are essentially "style over substance," as I wrote yesterday.

    Additional confirmation:
    Unfortunately, changing the chairman is only window dressing at this point.

    Update 3/31/2009: The question I raised here has now been raised in the mainstream media:

    In forcing the resignation of General Motors CEO Rick Wagoner, President Obama said he was seeking a fresh start, a "new vision and new direction," for the beleaguered automaker.

    But some critics are questioning why the president of the United Auto Workers union didn't meet the same fate, to signal a fresh start on the other side of the bargaining table...

    "I think it was political theater and there wouldn't be the same theatrical benefit of forcing Gettelfinger out," he said.

    Update 4/9/2009 (A week later): Representative Connie Mack (R-FL) is exactly right. If the president is willing to sack a CEO who apparently was successful dealing with the union for purely cosmetic reasons, shouldn't the president of the union get sacked as well? Or does President Obama think it's ok to meddle in the leadership of private companies but not in the leadership of unions? Why the double standard?

    What's good for GM should be good for the UAW, according to U.S. Rep. Connie Mack, R-Fla., who says President Obama should demand the resignation of United Auto Workers President Ron Gettelfinger...

    The resignations of both the company's head and the union's head would be only fair in efforts to shore up the auto industry, Mack said in a recent news release from his office.

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