SKYWALKER 2046

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RICK WAGONER STEP DOWN-SALUTE TO HARDLINE HEROS 2009/03/30

Filed under: Uncategorized — rogerwang2046 @ 14:06

After hanging onto his job amid nearly decade of turmoil and criticism, General Motors Corp. Chief Executive Rick Wagoner is being forced to resign by a presidential administration that has been in place fewer than 90 days.

In nine years as chief executive of GM, Mr. Wagoner presided over staggering losses of money and market share — and for the last three years had faced persistent calls for his head.

But Mr. Wagoner had fended off all critics until GM squared off with President Barack Obama’s auto task force. On Friday, Mr. Wagoner met with the head of the task force, Steven Rattner, and learned the government was pushing for a change at the top of the auto maker as it considered extending it more loans, a person familiar with the matter said.

Mr. Wagoner’s decision to step down leaked out on Sunday, catching even some top executives at the company off guard.

Reached at his home Sunday, Mr. Wagoner said, “I’m sorry, but I will need to pass” on the opportunity to comment.

Mr. Wagoner said in a statement released by GM, “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.”

Mr. Wagoner had served as GM’s CEO since 2000, and ran into serious trouble after the company stumbled to an $11 billion loss in 2005. The following year, billionaire investor Kirk Kerkorian, then holding nearly 10% of GM, forced the auto maker into merger talks with Nissan Motor Co. and Renault SA, in the hope of replacing Mr. Wagoner with Nissan/Renault’s Carlos Ghosn.

But Mr. Wagoner lined up allies, including Vice Chairman Bob Lutz and then-Chief Financial Officer Fritz Henderson, and drew up blueprints to thwart Mr. Kerkorian and Jerome York, who represented Mr. Kerkorian on GM’s board. Mr. Wagoner argued that GM had plenty of resources without adding Nissan/Renault as a partner, and claimed GM shareholders would get the short end of the bargain.

Just a few months ago, Sen. Christopher Dodd (D., Conn.) suggested Mr. Wagoner should go, saying GM needed to change the company’s direction after nearly running out of money and requiring government loans to stay afloat.

Through it all, Mr. Wagoner continued to have the confidence of GM’s board of directors, in particular the lead independent director, former Kodak CEO George Fisher.

Mr. Wagoner grew up in Richmond, Va., in an upper-middle-class home, and attended his father’s alma mater, Duke University. At 6 feet 4 inches tall, Mr. Wagoner walked on to Duke’s freshman basketball team in 1971. Ever since graduation, he had remained devoted to the school, currently serving on its board of trustees.

In 1977, Mr. Wagoner joined GM as an analyst in the company’s treasurer’s office that borders Central Park in midtown Manhattan. Mr. Wagoner spent much of his 30s in international operations, where he gained a reputation for trimming costs.

But after becoming chief executive in 2000, he consistently stopped short of dramatic action. Faced with an abundance of brands, each requiring costly marketing support, he killed one: Oldsmobile. But not until the company faced financial ruin in recent months did he take that measure two steps further, by announcing plans to close or sell off GM’s Saab, Hummer and Saturn brands.

Similarly, he never seriously attacked the costly burden of providing health care to the company’s retirees or otherwise reducing labor costs that made each GM car thousands of dollars more expensive to build than its foreign-based competitors.

Discussing labor-costs reductions in 2005, Mr. Wagoner said, “Our plans do not include anything radical like eliminating the JOBS bank,” referring to a program that provided pay to laid-off workers.

Mr. Wagoner consistently resisted any talk of bankruptcy. Instead, he constructed a set of external benchmarks for investors to monitor. The key benchmark was a commitment to cutting $9 billion in structural costs via capacity cuts, labor concessions and other measures. At the same time, he vowed to churn out better products and grow in China, Russia, Brazil and other developing economies.

Even as costs dwindled and emerging markets boomed, Mr. Wagoner could not stanch the consistent slide in U.S. market share. He also didn’t forecast a punishing rise in gasoline prices that would sap demand for GM’s core products, trucks and SUVs.

Kent Kresa, a GM director since 2003, said in an interview late last year that Mr. Wagoner and other GM executives constantly underestimated the auto maker’s troubles. Of the financial crisis that struck in recent months, destroying sales and liquidity, Mr. Kresa says, “I can honestly say no one ever projected this.”

By November, with little more than one month’s worth of cash on hand and still no commitment from Congress on a bailout loan, Mr. Wagoner addressed hundreds of employees at a town hall meeting at the company’s corporate headquarters in Detroit.

Mr. Wagoner was greeted with a standing ovation, according to people at the meeting. Employees said they were proud of Mr. Wagoner for defying calls for resignation and insisting the company would not file for bankruptcy protection. Yet at the same time, his resignation Sunday in exchange for financing needed to save the auto maker was characteristic of his devotion to the company he’d joined after graduating from Harvard Business School in 1977.

“He woke up every morning going to work with the devotion of a priest,” Peter Bible, the company’s chief accounting officer in 2006, said in an interview earlier this year.

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