U.S Auto Industry: Wagoner Gone, President Demands Changes

Looks like the time of reckoning for General Motors and it's CEO Rick Wagoner has arrived. As part of President Obama's new "tough love" approach, Wagoner was canned as PR-ploy to justify continued government intervention.

Remember the bailouts? Well, the date was March 31st to become "viable". The plans were reviewed by the Presidential Task Force on the Automotive Industry. The government apparently wasn't convinced either went far enough.

It was convinced though that GM has the capability to be viable. Chrysler, on the other hand, as a standalone entity has not been deemed viable. The Fiat partnership is imperative. Remember Chrysler is privately owned too, and Cerebrus has shown reluctance to put any more of it's own money into the company either. I think they do view it as a lost cause of sorts.

The main focus here though is GM. GM is the company that the administration believes can survive. If you have any doubt of that, President Obama sounded like a GM salesman today in touting the company's (considerable) achievements. "In 2008, the North American Car of the Year was a GM....this year, Buick tied for first place as the most reliable car in the world.".

Ford must be thankful for not needing these funds. It gets the advantages of increased cost cutting for future competitiveness due to the economic environment while not getting the stigma of government support and mandated changes.

Rick Wagoner, GM  CEO and a lifelong employee of the company resigned at the "government's request". Doesn't something seem odd about that to you? To me, it's wrong. Let's be honest: the government forced him out. Plain and simple.

But Mr. Wagoner has been making huge strides at General Motors; this crisis is not his doing. It's sad to see a dedicated person fall by the wayside for political reasons. The basis for a future recovery and success at General Motors will come based of the progress he made. It's sad he won't get the credit for that. He should have been around to see the company through this difficult time. He knows them better then anyone.

Other news includes the government's "Warranty Commitment Program" that promises to cover all GM and Chrysler warranties while their future is being worked out. Also, in probably the only bit of good news for the industry, it looks like the vaunted "Cash for Clunkers" program that has seen such success in other countries will find it's way over here as well.

Funds will be "Carved out of the Recovery Act". Interesting, as that wasn't part of the package. Wonder where it will come from? Hopefully not infrastructure.

The point here is not to criticize the President, but it shows a whole new ballgame that we're operating in and one I believe we must divert from quickly.

To have a U.S President making a statement like: "Let me be clear: the United States government has no interest or intention of running GM. " is incredible. Fact is, at least for the interim, that is proving to be anything but the case.  

GM has 60 days to meet the President's demands and funding will be supplied for that time. Chrysler has 30 days, with funding supplied during that time as well.

It looks like the can has been kicked down the road far enough and this is the time where we truly grapple with the sacrifices needed to have a competitive industry. I think this will prove to be a dangerous political gamble as well, as with these actions, the President and the government are taking de facto responsibility of the future of the industry.

In all of this I have an a lot of uneasiness about the whole situation. The President "demanding" changes. This isn't a dictatorship! The dramatic increase of the role of the federal government is scary, and unprecedented. Government is now in control. Government Motors indeed.