GM and Peugeot bosses hit the road

GM and Peugeot Citroen are sacking their CEOs - the first top-level victims of the car sector's breakdown.

by
Last Updated: 06 Nov 2012

General Motors is giving chief exec Rick Wagoner his marching orders after a request from the White House, which follows President Obama's refusal to dish out yet more cash to the faltering car giant. The message from the President: sort yourself out or face insolvency.  

Obama's taskforce on the state of the US car industry concluded that GM's plans for restructuring simply aren't viable. After its failure to meet debt-cutting targets and reduce benefits to staff, GM will only receive another 60 days' working capital from the government - and after that it's going to need much tighter restructuring plans if it is to get any more help. At the same time the White House is telling GM's troubled rival Chrysler to merge with Italy's Fiat or face the consequences, that the US government will only front up another 30 days of working capital.

It marks a harsh line from the President, who's understandably keen to show taxpayers that there is a limit to how much of their cash he's willing to dish out to the country's lumbering auto giants. Obama's statement that the US car industry needs to emerge ‘much more lean, mean, and competitive' shows that he realises what others have been saying for ages: that the likes of GM need to spend a lot more time in the wind-tunnel, working on their aerodynamics.

You can forgive Obama for feeling less than charitable, although his actions won't do anything to reassure those who are concerned over rising levels of political interference in American business. GM and Chrysler have already received $13.4bn in government aid between them. Of course, that hasn't stopped both companies from doing an Oliver Twist and asking for more - GM shuffled forward with its bowl requesting another $16.7bn; Chrysler another $5bn. They may be hugely important employers, but the last thing Obama needs when stepping into the hot-seat, on top of the worst economic crisis for decades, is to have to dish out yet more billions in taxpayers' cash.

As for GM's restructuring plan, it's going to be a challenge. The company is already cutting its number of plants from 48 last year to 33, reducing its brands from eight to four, and planning 47,000 job cuts for the end of the year - the bloodiest cull yet of any American firm in the recession.

Closer to home, Peugeot Citroen's chief exec Christian Streiff has paid the price for huge losses at the French giant, which has also just announced a massive wave of job cuts. Streiff will be replaced by Philippe Varin, the former boss of Corus who, the company confidently asserts, will be able to ‘unlock' the company's potential. With Peugeot announcing losses of Eur343m last year, and planning to cut 11,000 jobs this year, that seems like booting one man out of a car with no brakes and telling someone else to jump in and stop it. Quite what they expect Varin to achieve by taking the wheel in such treacherous conditions, we're not sure.

Back at GM, Wagoner's exit marks an ignominious end for the GM lifer, who started at the company as an MBA graduate back in 1977, and rose to chief exec eight years ago.

Here at MT we can't say we're surprised at GM's woes. When we interviewed him all of three years ago Wagoner admitted even then he was being strangled by the legacy costs involved in paying health insurance on his retired employees. It didn't take much of a global storm to blow his already weakened company away.

Wagoner famously dropped his salary down to $1 this year - from $5.4m last year and $14.1m in 2007. But this time the company is in real dire straits, and it's going to take more than symbolic gestures to avert a full-scale car crash.

 

 

 

 

 

 

 

 

 

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