Blog: Dave LeggettWhy Wagoner had to go

Dave Leggett | 30 March 2009

The spotlight is back on Detroit again this week and the big news today is that GM CEO Rick Wagoner has been forced to resign under pressure from the White House. The March 31  ‘viability’ deadline is looming and it’s becoming clear that more radical actions to restructure companies are urgently needed.

The US light vehicle market numbers for March are looking pretty horrendous (around 40% down on last year) and they are calling into question the assumptions made by both GM  and Chrysler in their existing turnaround plans.

Wagoner had to go for a host of political reasons related to the simple fact that he has presided over the unfolding crisis at GM. He may be very highly regarded as a manager, but he was seen by many as a symbol of the old guard and culture that has contributed, along with the unprecedented economic crisis, to GM’s current plight.

In return for the possibility of more federal funds at this late hour, he had to walk.

It wasn’t all that long ago that Wagoner was being hailed as the architect of a consensus-based turnaround for GM. He was seen as a shrewd negotiator and one who had the trust of  the UAW. He also saw off a determined boardroom challenge and an attempt to bounce him into teaming up with Renault-Nissan, further bolstering his position. His long tenure as CEO stands testament to his undoubted managerial skills and qualities.
In recent years GM has been doing many of the right things and taking the right steps to resize its business. However, its efforts were outflanked by the severity of the economic recession in the US and its impact on GM sales.

Wagoner’s critics will say that he should have acted sooner and with greater resolve to put things right. Whether that is a fair criticism or not, he was the CEO and the buck has to stop somewhere and be seen to stop somewhere.

President Obama’s message to GM appears to be that we have now really reached the last chance saloon and that there is absolutely no room for niceties. For the man who replaces Wagoner as CEO, Fritz Henderson, it will be a very hot seat with some tough decisions on cost cutting having to be taken immediately.

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