Fox Business' Varney mischaracterizes Wagoner's departure
On America's Newsroom, Stuart Varney asserted that Rick Wagoner's departure is "the first time in modern history that the government has fired the chief executive of a private corporation." In fact, the government did not "fire" Wagoner, but made his departure a condition of further government aid for the company.
During the March 30 edition of Fox News' America's Newsroom, co-host Martha MacCallum claimed that President Obama "told [Rick Wagoner,] the boss of General Motors: You are fired," and Fox Business Network contributor Stuart Varney claimed that "it's the first time in modern history that the government has fired the chief executive of a private corporation." In fact, the government did not fire Wagoner, but made his resignation a condition under which the federal government will extend further aid to GM. Moreover, Varney's claim that the decision lacked precedent ignored similar decisions at American International Group (AIG) and at Fannie Mae and Freddie Mac, where chief executives were removed in September 2008 as part of agreements to accept government aid.
In announcing his resignation, Wagoner stated , "On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have." While MacCallum claimed that Obama "fired" Wagoner, she did not point out that Wagoner's resignation was a condition of additional government assistance. Indeed, a March 30 New York Times article reported , "The White House on Sunday pushed out the chairman of General motors and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid" [emphasis added]. The Times continued:
The decision to ask G.M.'s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration's determination to keep a tight rein on the companies it is bailing out -- a level of government involvement in business perhaps not seen since the Great Depression.
President Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy -- a quick, court-supervised restructuring, as they described it -- could still be an option for one or both companies.
Mr. Obama's auto industry task force, in a report released Sunday night assessing the viability of both companies and detailing the administration's new plans for them, concluded that Chrysler could not survive as a stand-alone company.
The report said the company would get no more help from the government unless it can finalize a proposed alliance with the Italian automaker Fiat by April 30. It must also reduce its debt and health-care obligations.
If a deal is reached between Chrysler and Fiat, the administration says it would consider another loan of $6 billion to Chrysler.
G.M., on the other hand, has made considerable progress in developing new energy-efficient cars and could survive if it can cut costs sharply, the task force reported. The administration is giving G.M. 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time.
Along with Mr. Wagoner's ouster, the task force said most of the company's board would be replaced over the next few months. In a statement Monday, Mr. Wagoner said he had been urged to "step aside" by administration officials, "and so I have."
His resignation is the latest example of the government taking a hands-on role in making major decisions at companies it is bailing out. The government has already pushed banks to make management changes and sharply reduce or eliminate their dividends, and it also is directing many of the decisions at the troubled insurance giant American International Group, which is nearly 80 percent owned by the government after its rescue.
In deciding to urge Mr. Wagoner to step down, the Obama administration seemed mindful of the public's growing outrage over bailouts of private companies, as well as the bonuses paid to employees of A.I.G.
Mr. Obama is well aware that he cannot afford to give the appearance of using tax dollars to reward executives who have done a poor job, and he began signaling as early as last week that he would take a tough stance with the automakers.
Moreover, contrary to Varney's claim that the decision to ask for Wagoner's resignation as a condition for further government aid was "historic," several executives have been asked to resign as a condition for receiving government aid since September:
- In a September 7, 2008, jointly released statement , then-Treasury Secretary Henry Paulson and then-Federal Housing Finance Agency director Jim Lockhart announced that as part of the government's decision to take Fannie Mae and Freddie Mac into conservatorship, "New CEOs supported by new non-executive Chairmen have taken over management of the enterprises."
- A September 17, 2008, Washington Post article reported  of the Bush administration's decision to bail out AIG, "The terms of the rescue package allow the government to replace [chief executive Robert] Willumstad, and a source familiar with the matter said last night that Willumstad would be succeded [sic] by Edward Liddy, former chief executive of Allstate." Likewise, a September 17, 2008, Associated Press article reported :
In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world's largest insurers and the right to remove senior management.
AIG's chief executive, Robert Willumstad, is expected to be replaced by Edward Liddy, the former head of insurer Allstate Corp., according to The Wall Street Journal, citing a person it did not name. Willumstad had been at the helm of AIG since June.
Under the deal, the Federal Reserve will provide a two-year $85 billion emergency loan at an interest rate of about 11.5 percent to AIG, which teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.
AIG shares sank $1.34, or 36 percent, to $2.41 in morning trading Wednesday. They traded as high as $70.13 in the past year.
The government's move was similar to its bailout of Sept. 7 of mortgage giants Fannie Mae and Freddie Mac, where the Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke.
From the March 30 edition of Fox News' America's Newsroom:
BILL HEMMER (co-host): Good morning, everybody, on a Monday -- Fox News Alert now. We are awaiting news from the White House on the future of America's auto industry, and the president will step to the cameras this morning to tell the country how Detroit has come up short on plans to restructure. Chrysler is all but history. GM is on life support. More than a million jobs hang in the balance. That is where we start this morning. And good morning -- whole new week here in America's Newsroom. Hello.
MacCALLUM: I'm Martha MacCallum. Good morning, everybody. Good morning, Bill. I'm in for Megyn Kelly today. Even before the president speaks this morning, he sent a message that was heard loud and clear from coast to coast. He told the boss of General Motors: You are fired.
HEMMER: Rick Wagoner, the man on your screen, had almost four decades with GM, and now he is out. Our man Stu Varney, out of FBN, says welcome to the new America, where elected officials can hire and fire folks who work in what was previously called the private sector. That man leads our coverage. Stu Varney, good morning to you. What do you make of this?
VARNEY: Good morning, Bill.
HEMMER: How do we understand it?
VARNEY: OK. This makes history -- makes history for two reasons. Number one, it's the first time in modern history that the government has fired the chief executive of a private corporation. The government does not own General Motors, but it totally controls it.
Second, it's the first time that I can remember that the American government has forced the sale of an American private corporation to a foreign company. Chrysler is being forced into a deal to be taken over by Fiat of Italy. More than that, if they got a deal after 30 days, the new deal -- the Fiat-Chrysler organization -- gets $6 billion of taxpayer money.
Bill, the writing is on the wall for any private company that takes government money. The government is going to tell you who you can fire -- who you can fire, how much you can pay them, the perks that they can receive, their business practices, and basically what product you can put out. History.
HEMMER: Sounds like oversight a hundred percent of the way.
VARNEY: Yeah, it's full control.
HEMMER: When you think about it, too, the White House sending its own team to Detroit to oversee the new restructuring. These companies are not going to make a move unless the White House gives them the thumbs up.
VARNEY: No. The government now controls the car industry in the United States.