The Obama administration’s forcing out GM CEO Rick Wagoner and pushing Chrysler LLC toward a merger and threatening bankruptcy for both sent GM shares plunging yesterday. Steps outlined by the White House auto panel marked a major reversal for management at both GM and private equity-owned Chrysler.
The Obama administration pledged only to fund GM’s operations for the next 60 days while it develops a sweeping restructuring plan, instead of granting GM’s request for up to a further $16 billion in loans.
Wagoner was forced out at the request of the autos panel headed by former investment banker Steve Rattner. A majority of GM’s board will also be replaced.
GM President and Chief Operating Officer Fritz Henderson was named as new CEO.
Chrysler was given 30 days to complete an alliance with Italy’s Fiat or face a cut-off of its government funding that could force its liquidation (they did submit an alliance plan yesterday). The auto panel rejected a claim by Cerberus that Chrysler could be viable on its own, citing its relatively small size, weak product line-up and declining U.S. market share.
If Chrysler can complete its alliance with Fiat and cost-saving deals with creditors and its major union, the Treasury would consider investing up to another $6 billion, Reuters reported.