Ignoring AIG, Fannie, and Freddie, Wash. Times editorial labeled Wagoner's departure "unprecedented"
Research ››› ››› NATHAN TABAK
A Washington Times editorial labeled Rick Wagoner's departure from GM as "unprecedented." At no point did the editorial mention that the government has required AIG, Fannie Mae, and Freddie Mac to replace their CEOs as a condition of receiving government funds.
In a March 31 editorial, The Washington Times claimed of Rick Wagoner's resignation as General Motors CEO: "In a unprecedented move, the Obama administration essentially fired TK Waggoner [sic], the chief executive of General Motors. This is unheard of in American history -- and sends an ominous signal to millions of shareholders for whom the auto maker is part of their retirement plans." At no point did the editorial mention that, in September 2008, the government reportedly required AIG to replace its CEO as a condition of receiving government funds, and, when he announced the conservatorship of Fannie Mae and Freddie Mac, Bush Treasury Secretary Henry Paulson stated that the CEOs at both companies were being replaced.
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."
Since September, Freddie Mac, Fannie Mae, and AIG executives have been removed in the context of a government bailout:
- In a September 7, 2008, jointly released statement, Paulson and then-Federal Housing Finance Agency director Jim Lockhart announced that as part of the government's taking Fannie and Freddie 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." On September 17, 2008, the Associated Press likewise reported Willumstad's removal as a part of the bailout deal.
In addition, in September 1979, then-Chrysler CEO and chairman John Riccardo resigned while the company was seeking federal aid, reportedly under pressure from the Carter administration. According to a September 21, 1979, Washington Post article, before Riccardo's resignation, "President Carter told a town meeting in Burlington, Iowa, that any government aid package would require Chrysler to 'reconstitute their management.' [Then-Treasury Secretary G. William] Miller made a similar point on Saturday, stating that while any management shift must be made by Chrysler's board, 'I'm sure' that before a final plan goes to Congress, a decision on future management resources would be made."
Congress ultimately enacted the Chrysler Corporation Loan Guarantee Act, which became law on January 7, 1980.
From the September 21, 1979, Washington Post article (retrieved from Nexis):
Chrysler Corp. board Chairman John Riccardo announced yesterday he will seek early retirement, "effective immediately," from the ailing automobile manufacturer.
Riccardo's departure was seen as evidence of Carter administration pressure for changes in Chrysler's top management, prior to any endorsement of loan guarantees the company is seeking.
Riccardo, who was due to step down in December as chief executive in any event, will make his retirement request at a Chrysler board meeting Thursday.
As chairman and chief executive, Riccardo is expected to be succeeded by Lee Iacocca, the ousted former president of Ford Motor Co. who was hired as Chrysler president last November by Riccardo. At the time, Riccardo told reporters that Iacocca probably would be named chief executive in about one year.
Riccardo's announcement yesterday came 48 hours after the company was rebuffed by Treasury Secretary G. William Miller in its request for $1.2 billion in federal loan guarantees. Miller termed the request "way out of line."
Last month, President Carter told a town meeting in Burlington, Iowa, that any government aid package would require Chrysler to "reconstitute their management." Miller made a similar point on Saturday, stating that while any management shift must be made by Chrysler's board, "I'm sure" that before a final plan goes to Congress, a decision on future management resources would be made.
Riccardo said yesterday he will seek early retirement for two reasons -- health and the company's need to have a new management team in place.
He said that he had been hospitalized earlier this year because of a heart problem," and advised by physicians to retire immediately. "However, I felt at the time that in view of Chrysler's serious situation I should stay on until the end of the year in order to provide the funds necessary to return Chrysler to profitability," he stated.
Moreover, "there is no question that even though I have actively addressed the major problems facing Chrysler, in the minds of many I am closely associated with the past management of a troubled company," Riccardo added. "It would be most unfair to the new management and the employes [sic] of Chrysler if my continued presence as board chairman should in any way hinder the final passage of our request for federal loan guarantees."
Both Riccardo, 55, and Iacocca recently agreed to give up all but one dollar of their $360,000 annual salaries for two years. Iacocca will be 55 years old next month.
Other media outlets also reported that Riccardo stated of his resignation: "[T]here is no question that even though I have actively addressed the major problems facing Chrysler, in the minds of many I am closely associated with the past management of a troubled company. ... It would be most unfair to the new management and to the employees of Chrysler if my continued presence as board chairman should in any way hinder the final passage of our request for federal loan guarantees." From an October 1, 1979, Newsweek article (retrieved from Nexis):
Riccardo was originally scheduled to step down in December, in part because of heart problems he developed earlier this year. But last week, he added a second reason. "I am closely associated with the past management of a troubled company," Riccardo said. "It would be most unfair to the new management and the employees of Chrysler if my continued presence should... in any way hinder our request for Federal loan guarantees." Chrysler's original bid for $1.2 billion in loan guarantees was rejected two weeks ago by Treasury Secretary G. William Miller, and the firm is now working on a second proposal.
From a September 18, 1979, AP article (retrieved from Nexis):
Chrysler Corp. Chairman John Riccardo, fearing he might be an obstacle to federal help for the troubled company he serves as chief executive, is asking for early retirement.
Riccardo also said Monday he had been advised by doctors to retire after a heart problem flared up in May, and had decided "this is the appropriate time to follow the advice."
He said he would ask Chrysler's directors at Thursday's board meeting to let him go immediately.
Riccardo did not specifically say he would recommend president Lee A. Iacocca to succeed him as chief executive, but it was clear he would.
He called Iacocca "one of the foremost automobile men in the industry. That was my judgment when I brought him in, and that is my judgment now. I am absolutely confident that under his leadership the company will return to the position of eminence that it deserves," Riccardo said in his statement.
It was agreed when Iacocca came from Ford Motor Co., where he had been president, last November that he would succeed Riccardo at the end of the year as chief executive, with Riccardo staying on as chairman. Iacocca was not expected to take the chairmanship at the time.
"There is no question that even though I have actively addressed the major problems facing Chrysler, in the minds of many I am closely associated with the past management of a troubled company," Riccardo said.
"It would be most unfair to the new management and to the employees of Chrysler if my continued presence as board chairman should in any way hinder the final passage of our request for federal loan guarantees," Riccardo said.
He said he was now "confident that the necessary assistance will be provided" because "even though the final amount is not yet fixed, the administration has agreed it will support a loan guarantee."
Chrysler turned to the federal government after reporting a $207 million loss for the second quarter. On Saturday, it presented its revival plan to Treasury Secretary G. William Miller, who said the request for $1.2 billion in loan guarantees was too high and would have to be reworked.
From the March 31 Washington Times editorial:
In a unprecedented move, the Obama administration essentially fired TK Waggoner [sic], the chief executive of General Motors. This is unheard of in American history -- and sends an ominous signal to millions of shareholders for whom the auto maker is part of their retirement plans.
Little wonder that GM's stock sank by 25 percent on the news, a loss of over a half-billion dollars in wealth. While other factors undoubtedly contributed to the sell-off, the drop in the overall stock market today is hardly encouraging. Many investors worry which companies and executives are next. Turmoil is hardly the way to restore investor confidence while the nation endures one of the worst financial crisis [sic] in living memory.
President Obama claimed Monday that he has "no interest or intention" of running the auto industry. But that's just what he's doing. As we saw in Italy and France in the post-war years, when politicians pick corporate leaders or set company strategy, the profitability and even the health of firms declines. So Mr. Obama's boast that "my team will be working closely with GM to produce a better business plan" suggests a sharp veer in a failed European direction. There was little doubt about Mr. Obama's intent when he said he is "absolutely committed ... to meet one goal ... building the next generation of clean cars." The president doesn't seem to care that hybrid-car sales have plunged by two-thirds since April 2008, a much steeper decline than total car sales.
Mr. Obama is also micromanaging Chrysler's merger talks with Fiat -- requiring in what country different engines will be built.
Industry analysts and Democratic lawmakers view Mr. Obama's approach with alarm. (They have noticed that shareholders vote too.)
Firing GM's CEO is may [sic] be politically popular with some. But cooler heads have noted that Mr. Obama has now taken political responsibility for one of America's most-troubled and vexing industries. Hardly seems like a political winner in the long run. Others feel sorry for Mr. Waggoner [sic]. Democratic Michigan Gov. Jennifer Granholm was right when she called Mr. Wagoner a "sacrificial lamb." Jeremy Anwyl, at the automotive website Edmunds.com, told us that Mr. Wagoner's firing was "political theater."
While Mr. Obama has forced the country on to the autobahn of the Old Europe, he ignores the lessons of contemporary Europe. The Continent has largely sobered up from such statist meddling. Take Sweden, which refused to bail out its automotive and other industries.
Mr. Obama already controlled much of American auto industry policy. It was at his insistence that the original auto company loans were granted. Yet, having the Obama administration determining GM's CEO and micromanaging Chrysler's merger talks with Fiat, are placing a big bet that politicians can do what decades of professional managers have failed to do. It will be the biggest miracle since the 1980 U.S. hockey team's victory over the Soviet Union if the government gets this right ... and cause for more jubilation.