Debate over Wagoner's future at GM heats up

Pressure grows on him to step down

Robert Snell, Christine Tierney and David Shepardson / The Detroit News

A debate over whether embattled General Motors Corp. CEO Rick Wagoner should be removed heated up again on Monday even as Congress proposed a short-term industry bailout designed to keep the automaker from collapsing by year-end.

There have been several missteps on Wagoner's watch, but there are ample reasons he should stay at GM, analysts say.

Wagoner, 55, has amassed a long list of hits and misses since being named CEO in 2000. On the plus side, he has slashed $9 billion in costs, overseen a push into emerging and profitable overseas markets, landed landmark concessions from the United Auto Workers union, rejuvenated product development and narrowed GM's quality gap with foreign rivals.

The automaker also has pumped $103 billion into its pension and other retirement plans.

But GM has lost almost $73 billion since 2004, and its U.S. market share has dropped more than 6 percentage points to 22.1 percent. It remains saddled with too many brands and dealers, has taken on significant additional debt, and failed to take steps to boost liquidity to help insulate the company from the latest severe downturn.

Some critics think the automaker also relied too long on large SUVs and pickups -- a source of profits for years -- and failed to see the consumer shift to more fuel-efficient cars.

Growing pressure on Wagoner to step down emerged over the weekend as Washington readied a rescue bill for the industry. On Sunday, U.S. Sen. Chris Dodd, D-Conn., head of the Senate Banking Committee and a key player in the bailout situation, said it was time for the executive to "move on." Dodd reiterated his position on Monday, though he said it's not his job to "hire and fire."

The proposed $15 billion bailout bill sent to the White House on Monday did not specifically call for management changes.

President-elect Barack Obama said Sunday that Detroit auto executives should step down if they are not willing to adapt to changes in the market and the industry.

One longtime critic of GM management said Wagoner should stay -- for now.

"I advocated Wagoner going a couple of years ago," University of Maryland professor Peter Morici told The Associated Press on Monday. "At this critical time, it's the wrong time to change helmsmen."

Morici, who testified against giving the auto industry emergency aid before Dodd's committee last month, said the boards of GM, Ford Motor Co. and Chrysler LLC should pick who runs their companies, not Congress.

Wagoner rose to prominence when he was named chief financial officer in 1992 during GM's prior financial crisis, but ousting him now would accomplish little more than score political points and leave the automaker without the architect of a restructuring plan submitted to Congress last week, analysts said.

"In the world of politics, someone always wants to have a head on a plate," said Joe Phillippi, principal of Auto Trends Consulting Inc. in Short Hills, N.J. "But Rick's done a lot of things right."

It's hard to blame Wagoner for some factors hurting GM's business, analysts say. Volatile gasoline prices and a severe consumer credit crunch have sharply curtailed new car sales, a housing slump is hurting demand as well and the lingering bankruptcy of GM's former parts unit, Delphi Corp., are all putting a strain on GM. Still, GM has struggled to streamline its eight brands and dramatically thin its U.S. dealer network, actions that are included in the restructuring plan it submitted to Congress last week as part of its request for aid. Wagoner also has been faulted for a costly tie-up with Fiat SpA. GM spent $2.4 billion in 2000 to take a stake in the Italian automaker and paid another $2 billion three years ago to get rid of any obligation to buy the rest of it.

During a CNBC interview Monday, UAW President Ron Gettelfinger defended Wagoner.

"It's unfair to put it all on him," Gettelfinger said.

GM's 14-member board of directors issued a statement last week saying it still supports Wagoner. In recent months, as the automaker's financial troubles have mounted, the board has kept closer tabs on the company, with regular meetings and weekly conference calls.

Names of potential replacements for Wagoner are emerging. Carlos Ghosn, CEO of Nissan Motor Co. and Renault CEO, appears on nearly every short list of candidates if GM's top layer of management and its board are removed. Ghosn is already familiar with GM's operations after the Renault-Nissan alliance and GM explored a possible linkup in 2006.

Ghosn was considered one of the most capable executives in the business after turning around Nissan in 1999, but his reputation has receded from stellar heights as Nissan's performance has deteriorated. He has also been forced to scale back his objectives at Paris-based Renault.

Sources say Ghosn still believes Renault-Nissan would benefit from having a U.S. partner and continues to believe GM would be an excellent fit.

The pressure on Wagoner is not unique for companies receiving federal aid. The CEO of American International Group was ousted after the insurer received a bailout in September and new CEOs have been installed at mortgage giants Fannie Mae and Freddie Mac.

If Wagoner is forced out, GM Chief Operating Officer Fritz Henderson, a former chairman of GM Europe who has served as president of the automaker's Asia Pacific division as well as its Latin America, Africa and Middle East group, would be a capable replacement, analysts said.

Replacing Wagoner would be a "shame" but it would not be "a devastating loss if Rick were required to step down," auto analyst Aaron Bragman of IHS Global Insight said.

"Henderson is extremely competent and he could do as good a job as Wagoner of fulfilling the turnaround plan."

Replacing Wagoner would be a mistake, GM Vice Chairman Bob Lutz told The Detroit News.

"It's similar to sacking the mayor of a city because it got hit by an earthquake," Lutz said. " It seems to be 'to appease the Gods,' a meaningless ritual which, in this case, would be profoundly counterproductive."

Detroit News Staff Writer Louis Aguilar contributed.