GM's Wagoner To Leave At White House Request
STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. I'm Steve Inskeep.
RENEE MONTAGNE, host:
And I'm Renee Montagne.
At the White House, at this moment, President Obama is announcing a sweeping and rigorous plan to restructure Chrysler and General Motors, and to save them.
And early in his talk, he opened with these words: Year after year, decade after decade, we have seen problems papered over and tough choices kicked down the road, even as foreign competitors outpaced us. Well, the president said, we have reached the end of that road.
This talk follows a White House ouster, Rick Wagoner, the CEO of General Motors yesterday. The administration is giving two companies no more than 60 days to fix their problems. And even then, the White House says, it may force big companies Chrysler and GM through a quick bankruptcy.
NPR's Frank Langfitt covers the auto industry, and he's here in our studio. Good morning.
FRANK LANGFITT: Good morning, Renee.
MOTAGNE: This is a big, tough day for the Detroit car business. Why don't we begin with Rick Wagoner? I know the president's speaking but let's find out a little more about that.
LANGFITT: Well, the White House isn't saying this, but essentially it seems that the president of United States appears to have fired the CEO of General Motors. A year ago, this would have been unthinkable. But it's a sign of the shift in power in the business of the auto business, from Detroit to Washington. GM took taxpayer loans to survive, and now no longer appears to be completely in control of its fate.
MONTAGNE: Well, Chrysler isn't doing so well, either. Why did Rick Wagoner lose his job over their GM?
LANGFITT: That's a really good point. I'll tell one reason. Rick Wagoner has been there 30 years. And even though the most recent problems, these terrible auto sales, that's not Rick Wagoner's fault. The company had lost, you know, roughly 80 billion in the last four years when Wagoner was running it. Bob Nardelli over at Chrysler, he's a new guy. He's only been there about a year. So, I think the White House looks at them and, as they said before, as Mr. Obama is saying right, these are two different companies and they need two different solutions.
MONTAGNE: Now, the White House says the companies have failed to present restructuring plans that make them viable. What is the administration planning to do with them now? And the president is explaining some of that. I know you have a copy of his talk.
LANGFITT: He's going to put them on a short leash. GM gets another 60 days, Chrysler gets 30 days. They've got to make deeper cuts and more radical changes to their business plans. And what the president is saying is, everybody's going to share a lot of pain. That includes the union, which is owed about $20 billion on retiree health care.
The union isn't going to see that money. It's going to see some of it, but nowhere near what it hopes. And the White House, well, it says it will continue to provide money during this time so the companies can keep operating.
MONTAGNE: Well, also hurt, Frank, would be bond holders, investors.
LANGFITT: Yes, that's a lot of money too. That's - unsecured is about $27 billion, the bond holders are - they're owed. And basically, GM couldn't get them to agree to some sort of swap where they take shares in the company instead of getting all that money. And frankly, I think the White House was frustrated and is kind of fed up and said, you know, listen, you've got to restructure the company. And if you won't do it, we will.
What's really interesting in conversation of the administration last night, what they're saying is, you know, we may just take in the Chapter 11 bankruptcy. And that's the first time we've heard something so forceful like this from the White House.
MONTAGNE: Yeah. Let's go on to bankruptcy. I know, you know, Chrysler - they have something in mind for Chrysler. But if Chrysler doesn't join with Fiat into a partnership, it's going to go the same road as GM, possibly. And bankruptcy, I mean, both companies have said it would kill them.
LANGFITT: They had. And what Mr. Obama is saying right now is, he's saying, hey look, this isn't going to be like you're normal bankruptcy where you might spend a year because the customers will just, they wouldn't buy the products if they thought the companies weren't going to make it. And what he's saying is we're going to do something very quick. And in talking to administration officials last night, they said, it would be like a quick cleansing in Chapter 11, not a year - maybe as little as 30 days.
The advantage here is bankruptcy - there's just a lot of power. They break union contracts, the state franchise laws that protect the dealers of which there are two many for both companies. And so, I think what the White House is looking at more and more seriously, clearly, is taking them into bankruptcy to do the things that are harder to do, sort of, in this political environment. And I can tell you one thing, is that my sources in Detroit this morning who've read all the paper and all the documents out of the White House think bankruptcy is increasingly more likely.
MONTAGNE: Frank, thanks very much. NPR's Frank Langfitt.
And President Barack Obama is speaking at this moment about the White House plan to restructure Chrysler and General Motors.