President Ousts GM CEO In Effort To Restructure Motor City
MICHEL MARTIN, host:
I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, as a new generation of job seekers sails into a stormy economy, we visit a youth job fair to see what they see. But first, the auto industry crisis. Domestic automakers are scrambling to put together a survival plan that will satisfy the Obama administration. The president announced on Monday that neither General Motors nor Chrysler has created acceptable business plans to merit receiving additional federal bailout money. Here's President Obama addressing the issue yesterday.
President BARACK OBAMA: The pain being felt in places that rely on our auto industry is not the fault of our workers. They labor tirelessly, and desperately want to see their companies succeed. It's not the fault of all the families and communities that supported manufacturing plants throughout the generations. Rather it's a failure of leadership from Washington to Detroit that led our auto companies to this point.
MARTIN: To that point, Rick Wagoner, the CEO of General Motors, resigned from his post under White House pressure, and both companies have been given 60 days with some government assistance to come up with a better strategy. Joining us now to talk more about this is Tom Walsh. He's a business columnist for the Detroit Free Press. Also with us is Warren Brown. He covers the automotive industry for the Washington Post and writes the On Wheels column. He's been with us before to talk about these issues. Welcome to the program. Welcome back.
Mr. WARREN BROWN (Washington Post): Hey, Michel, good to be here.
Mr. TOM WALSH (Detroit Free Press): Hi, Michel.
MARTIN: Tom, can you tell us a little bit about the plans that GM and Chrysler did come up with and why the administration rejected them as insufficient?
Mr. WALSH: They're quite different plans. GM's calls for skinnying down, getting rid of a number of divisions - Hummer, Saturn - a number of brands - Saab - and both sides, both Chrysler and GM, have been directed under the terms of the loans made by President Bush to come up with concessionary deals with both the UAW, the CAW, the Labor Unions, and their bondholders. Chrysler, meanwhile, has to kind of show that it can survive either on its own or with a partner in this case, Fiat, is what they've suggested. But in neither case have the companies completed definitive agreement with the unions or the bondholders. So that's - that's sort of the main reason why the government said you haven't done what we asked of you so far.
MARTIN: Tough conditions for more assistance. Can you just briefly describe what those are, what's expected?
Mr. WALSH: Well, I think going forward they do want those deals with the bondholders and with the unions to be completed. In Chrysler's case, they want a Fiat deal, a Fiat alliance, whatever form it takes, completed with the I's dotted and T's crossed in 30 days. They have said that the Fiat alliance shows some promise in that Fiat has some expertise in small cars, whereas Chrysler has big trucks and mini-vans. But on the other hand, the taskforce said that Chrysler - they do not see Chrysler being able to survive as a stand-alone company.
MARTIN: Warren, one of the headlines, of course, was that Rick Wagoner was pressured to step down. Why did the government want him to step down and do you think that's a legitimate use of government authority?
Mr. BROWN: Oh, Michel, don't fall for this. Let me tell you. I'm going to give you breaking news on your show, okay?
MARTIN: He didn't step down.
Mr. BROWN: Alright. Well, this is a deal. On the surface, getting rid of Rick Wagoner and replacing him with Kent Kresa and Fritz Henderson doesn't make any sense. Beneath the surface it makes perfect sense as a well-orchestrated sham. I believe I know Rick Wagoner pretty well, and no, I didn't speak to him; yes, I did speak to a lot of people around him following this. You know, on the surface, you know, it appears that the Obama administration has, you know, placed Rick Wagoner on a political altar of expediency as a sacrifice on it. And that's what it looks like, and the people who love Rick Wagoner are all upset.
MARTIN: Well, I don't know, I'm not sure everybody shares that view. I think some people say, look, he - he didn't succeed, he had to go.
Mr. BROWN: Well, first of all, if the people who know Rick Wagoner say he didn't succeed, that's nonsense. You know, he completely turned around GM's manufacturing, you know, efficiency. He completely, you know, did a 360 degree, you know, turnaround on GM quality; it's competitive now with anything in world. Speak to James Harbour(ph) or Auto Pacific or any outside, you know, observing agency, and they will tell you. So that…
MARTIN: Okay, so what's your take on it? Why do you think the administration wanted him to go and why is this a sham?
Mr. BROWN: I think that the administration needed a scapegoat to try to send the message not only to the bondholders of GM and the unions and everybody else, but also to the bankers, you know, whose heads seem not to have rolled yet, you know, that the administration is serious. And I suspect - and I won't emphasize, I have no direct confirmation from Wagoner, you know, on this. I will suspect that Wagoner said, okay, go ahead and use me that way, but make sure that you keep money and, you know, for General Motors. And why is that? Because the public for some reason that I have yet to understand really is seemingly against, you know, wanting to save, you know, the car companies.
MARTIN: If you're just joining us, you're listening to TELL ME MORE from NPR News. We're speaking about the auto industry bailout with business columnist Warren Brown of the Washington Post and Tom Walsh from the Detroit Free Press. They both write about the auto industry. Tom, what's your take on Warren's point?
Mr. WALSH: Well, I think he's correct about the political expediency. I think Rick Wagoner would have gone during this process at some point. I think the overall record shows that General Motors has lost $82 billion in the last four years and head coaches don't keep their job when they keep losing that much. So I think, depending on what sort of form GM takes at the end of this process, Rick Wagoner would probably be out at some point. I think it was surprising that it was right now, as they're trying to go through the machinations of the viability plans.
But I do think that the AIG mess contributed to that. I think President Obama and Geithner looked a little bit flat-footed by the populist outrage over the AIG bonuses, and I think they did feel compelled to kind of make a statement that, you know, that this was a leadership failure and leadership has to pay in some way.
MARTIN: Warren, what's your take on the conditions over the next 60 days. Are they achievable, and are they sufficient to achieve the result?
Mr. BROWN: Look here, Michel, you want another, you know, belly-whopper? If over the next 60 days the American consumer remains on strike, as the American consumer is on strike right now, it won't make a difference what the government does or doesn't do. The current circumstance affecting the automobile industry is very simple. People are not shopping. I just came from out West, (unintelligible) Nevada, talking to dealers out there, and the automobile industry, at least the retail part of it, operates on something called the write, W-R-I-T-E, to roll ratio.
In other words, we can write a contract with a consumer, we can effectively sell the consumer the car. But if banks don't finance that contract to roll the car off the lot, then, you know, we are stuck. So that's frozen right now.
MARTIN: What about the - the administration said that they would offer, assess sort of a government warranty, that they would warranty the existing automotive warranty, and some of the dealers, in fact - or Ford Motor, for example, says it's offering a payment protection hand to reassure consumers who may be putting off a car purchase because they're worried about losing their jobs. They say they'll cover payments up to $700 each month for up to a year.
Mr. BROWN: Well, that's smart, but you know, that payment protection plan is basically everybody copying Hyundai, which was the first to do that with the Hyundai Assurance Plan and then with the Hyundai Assurance Plus Program. That's a smart thing because that speaks to the mind of the consumer. The consumer is saying, you know, you're kicking me out of my job, you're cutting my pay, you're riffing me, you know, you're taking away my benefits, I'm not going to shop.
And that's the problem, that's the problem. The consumer is on strike. We have to get the consumer off strike.
MARTIN: Tom, what's your take on that? And I also wanted to ask you how are all these developments being viewed at the epicenter of the whole thing, in Detroit, where you are?
Mr. WALSH: Well, I think as far as the incentives to get people back in a showroom and protect warrantees, Warren's right: until you get credit loosened up and people back in the marketplace, it may not matter much at all. If you don't have dealers alive to service those cars, it doesn't matter whether the government's going to pay. Who are you going to have do it? Your buddy down the street? So that's one aspect. In Detroit, people are scared. But people have been scared for a long time here. We've been going through job losses of, you know, 10, 20, 30,000 people at a shot for a very long time, and now they see the prospect that, you know, one or more of these companies may not survive.
This place lived in denial for a couple of decades that, oh well, the Japanese really can't compete, or, oh well, this - there's no denial now; it's mostly fear. And you know, I think everybody's hoping that Obama succeeds and that the companies in some form or another can right themselves.
MARTIN: Do you think that the Big Three will exist this time next year?
Mr. BROWN: There is no Big Three.
MARTIN: There is no big three.
Mr. BROWN: No, you know, look, everybody - and noted with cynical glee, President Obama's notation that what had been the Big Three had been losing market share for a while. Well, dear Mr. President, here is the reality - and I think you, Mr. President, probably already knows this, already - you know, you're familiar with this. America is becoming Europe, like it or not. You know, in Europe nobody has more than a 20% share of the market. You know, the biggest car company in Europe is Volkswagen. Volkswagen has, I think, about, what, you know, a 20 percent, 20.1 percent share of the market. In the United States, General Motors has a 21.1% share of the market. You know, America is becoming Europe. Very competitive.
MARTIN: Well, that - I think we have to leave it there for now. Warren Brown is the columnist for the Washington Post who covers the automotive industry. His column is called On Wheels. He joined us here in our Washington, D.C. studios. We were also joined by Tom Walsh, who's a business columnist for the Detroit Free Press. He joined us from Detroit. I thank you both so much.
Mr. WALSH: Thank you.
Mr. BROWN: Thanks, Michel.
MARTIN: Remember, at TELL ME MORE the conversation never ends. We'd like to hear your thoughts about the auto industry bail-out. Do you want President Obama and the government to devote more time and money to helping rescue domestic carmakers? Do you think they should hit the brakes on the bail-out, cut their losses? Is it too late? To tell us more, you can call our comment line 202-842-3522. Again, that's 202-842-3522. Please remember to tell us your name. Or you can always log onto our Web site. Just go to NPR.org, click on TELL ME MORE, and blog it out.
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Correction March 31, 2009
In some broadcasts, the introduction to this segment said "both [GM and Chrysler] have been given 60 days with some government assistance to come up with a better strategy." In fact, Chrysler has been given a 30-day deadline.