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Business

Obama forces GM head Rick Wagoner to resign

Video by Louis MASSIE , KARINA CHABOUR

Latest update : 2009-03-30

Fritz Henderson will be the new CEO of General Motors, the company announced after Rick Wagoner stepped down on Sunday. US President Barack Obama is due to announce further plans to help the country’s floundering car companies on Monday.

AFP - President Barack Obama was due to unveil Monday his plan for troubled US automobile companies as he stepped up pressure on the industry by forcing General Motors head Rick Wagoner to resign.
   
GM confirmed Wagoner's immediate resignation early Monday and said he would be replaced by Fritz Henderson, the company's current president and chief operating officer.
   
In a message posted by the company's website, Wagoner said that on Friday he was in Washington for a meeting with Obama administration officials, and they requested that he "step aside" as CEO.
   
A senior administration official confirmed the account to AFP Sunday.
   
The shakeup at the company was expected to continue. GM Chairman Kent Kresa said the company’s restructuring "will likely cause a significant change in the stockholders," and the board intended to nominate a new slate of directors for its next annual meeting.
   
Wagoner's ouster comes as General Motors and Chrysler are teetering on the edge of bankruptcy and seeking another 21.6 billion dollars in government loans.
   
The administration official said, however, that Wagoner's departure was not a "quid pro quo" for receipt of a fresh infusion of federal funds.
   
As Obama prepared to announce his new plan at 11:00 am (1500 GMT), he made it clear he felt GM and Chrysler had not yet done enough to restructure their companies and earn billions more bailout dollars.
   
"They're not there yet," Obama told CBS television Sunday. "We think we can have a successful US auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is."
   
An Obama task force has been working to resolve the woes of the auto industry, a key pillar of the US economy that has been hit hard by plunging global cars sales amid the economic downturn.
   
General Motors and Chrysler have already received 17.4 billion dollars in emergency loans approved in December to help them stay afloat.
   
Ford, the other member of Detroit's Big Three, has said it has enough cash to survive the downturn without government aid.
   
GM and Chrysler must come up with viability plans to show the path to profitability, requiring deeper job cuts, new agreements with unions to slash costs and acceptance by bondholders of a plan to cut the automakers' debt.
   
"There's been some serious efforts to deal with a combination of long-standing problems in the auto industry and the current crisis, which has seen, you know, the market for new cars drop from 14 million to nine million," Obama said Sunday.
   
But he added that to ride out the crisis there had to be "sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers.
   
"Everybody's going to have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road," the president said.
   
US auto sales extended their downward spiral in February, falling 41 percent from a year ago to the lowest rate since December 1981 amid a deepening economic crisis. And some analysts say March sales could be equally bleak.
   
Obama task force lead advisor Steven Rattner told the Detroit Free Press this month that "bankruptcy is not our goal," but that court restructuring may be needed if there is no alternative.
   
Analysts say the administration is basically pursuing a two-track approach by offering them short-term help through the bridge loans while offering longer-term financing for new research and development.
   
The US administration wanted to see "a strong automobile industry. We want it to emerge from this period of challenge stronger," Treasury Secretary Timothy Geithner stressed Sunday.
   
"That's going to require a lot of restructuring. We're prepared as a government to help that process if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support," he told ABC.
   
Automakers are pledging to increase their commitment to building greener cars in return for the extra government loans.
   
"Additional support will help us accelerate our efforts to reinvent GM and the cars and trucks we build," GM spokesman Tom Wilkinson said in a statement.
   
"We want to play a significant role in revitalizing America's economy and re-establishing its technology leadership."

Date created : 2009-03-30

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