General Motors’ (GM:NYSE) CEO Rick Wagoner is not happy. The U.S. basically blackmailed him out of his job.
In what’s being called the most surprising and dramatic government interventions since the financial crisis began, the administration threatened to withhold more bailout money for the beleaguered company unless Wagoner submitted his resignation.
In a statement posted on GM’s Web site, Wagoner wrote, “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.”
“The administration officials would not say how much more money they might ultimately lend to GM or how much working capital the automaker would need to make it through the next 60 days,” CNNMoney.com reported.
That’s not all…
Taipan Daily
"For more than a year I've followed your results and comments... the only word I can use to describe my experience is 'fantastic'." -- John, member
Taipan Daily is your FREE resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector (from blue chips to small caps... options to ETFs... emerging markets to the tech sector), Taipan Daily delivers just the right mix of safe opportunities with the fast-moving plays, so you have an insider's edge over the Street... and other investors.
Enter your e-mail address below and click the Join Us button to begin receiving your e-alerts.
The U.S. government has also told Chrysler that it has 30 days to reach an agreement with potential part-owner Fiat SpA (F:Milan). A $6 billion bailout check is on the line. If Chrysler and Fiat reach an agreement, the company gets the money.
If it doesn’t, it will be allowed to collapse.
The Obama administration, according to MarketWatch.com, “said that the best chance for success for General Motors and rival Chrysler may be bankruptcy.”
A tough pill to swallow for America’s biggest and oldest automaker.
But as the government has already funneled $17.4 billion to these companies, and no viable restructuring has taken place yet, there should be a limit to just how much more the taxpayers have to fund a failing company.
(Incidentally, that should go for financial institutions as well, but we’ve been a bit gun-shy with them ever since Lehman Brothers’ collapse kneecapped global markets.)
It doesn’t help that this is the worst auto market in 27 years, according to Bloomberg. But stakeholders for either company, as evaluated by administration official, have not done enough to assuage financial burdens.
By June, we should know if the U.S. will still have a GM.
Markets are in a free fall on the news. Adam Lass, editor of WaveStrength Options Weekly, writes, “Auto loan delinquencies rose almost 9% in the last quarter of 2008. Heck, even the repot man is going broke. Now we are looking at a 32% drop in auto financing.”
He continues, “The sector as a whole is in about as much disfavor as is possible for ongoing concerns, and shares for just about every auto manufacturer have taken some serious hits.”
GM has fallen 25% on the news today, while rival manufacturer Ford (F:NYSE) has dropped a modest 5%.
Other Articles Related To This Topic:
