Archive for March, 2009

GM CEO forced out as U.S. readies autos aid (Reuters)

Sunday, March 29th, 2009 | Finance News

WASHINGTON (Reuters) –
General Motors Corp Chief Executive Rick Wagoner resigned under pressure from the Obama administration on Sunday as the government prepared to announce a second bailout for the company and its smaller rival Chrysler LLC.

Wagoner, a career GM executive and CEO since 2000, is stepping down as the top U.S. automaker struggles with a recession-fueled sales implosion that has pushed GM and many of its suppliers and dealers to the brink of failure.

"For them to change captains right in the middle of the rapids is not something GM would have done, but now (President Barack) Obama or (Treasury Secretary Timothy) Geithner can say, we've asked them to make the ultimate sacrifice," said Aaron Bragman, an analyst with IHS Global Insight.

University of Maryland economist Peter Morici, a one-time critic of Wagoner who had called for him to resign but now believes he had "started to get it," said the administration has a "PR problem" regarding unpopular corporate bailouts.

"They are bailing out just about anybody that shows up and says they need cash. The public has grown weary of it and instead of throwing a banker to the wolves they have decided to throw Wagoner to the wolves," Morici said.

GM would not confirm the decision. A White House official, who spoke anonymously because the resignation had not been announced, said it was done at the request of the administration.


There was no word from the government or others with knowledge of the situation on the timing of Wagoner's departure or who would replace him.

Fritz Henderson, GM's chief operating officer, is the No. 2 executive at the automaker and widely considered to the leading internal candidate as Wagoner's successor.

Obama last week cited mismanagement "over the years" for some of the auto industry's severe financial problems, a point that stung Wagoner since his counterparts at Ford Motor Co, Alan Mulally, and Chrysler, Bob Nardelli, are relative newcomers brought in from outside the industry.

GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM has lost about 95 percent of its value since Wagoner took over as CEO.

Wagoner was in Washington on Friday to meet with the White House-appointed task force on auto restructuring. Obama is expected to announce that panel's recommendations on Monday.

Together, GM and Chrysler have asked for another $22 billion in government loans to ride out the weakest market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help.

Obama said earlier Sunday that GM and Chrysler have not done enough to save themselves since receiving a $17.4 billion bailout in December.

"They're not there yet," Obama said in a taped interview on the CBS-TV news program "Face The Nation."

GM and Chrysler have run through most of the initial bailout and are at risk of bankruptcy without immediate help.

Chrysler, which is also pushing to complete a tie-up with Italy's Fiat SpA, has said it needs additional funding as soon as Tuesday to avoid a cash crisis.

But neither automaker has finished the cost-cutting overhaul dictated by the terms of the auto industry bailout launched by the Bush administration that set a deadline of March 31 for determining whether the companies can be saved.

Analysts say that presents a dilemma for the Obama administration. GM and Chrysler employ almost 160,000 U.S. workers and allowing the automakers to fail would cause widespread hardship, especially in the industrial-belt Midwest, at a time when the economy remains mired in recession.

As confidence has grown that the White House will not push the car companies into bankruptcy, it has also become more difficult to clinch cost-saving deals both GM and Chrysler need to reach with creditors and the United Auto Workers union.

Obama said the automakers had more work to do to win concessions from creditors, labor and other groups.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm," Obama said, stressing that all parties must sacrifice.

GM and Chrysler have won pending contract concessions from the United Auto Workers intended to bring factory labor costs in line with those of Japanese automakers led by Toyota Motor Corp that have operations in the United States.

But GM and Chrysler have failed to meet other targets set for them by the government in December. In particular, talks intended to cut debt at both companies have failed to produce results over the past six weeks.

(Additional reporting by Jui Chakravorty Das in New York, David Alexander in Washington and David Bailey in Detroit; Editing by Maureen Bavdek and Chris Wilson.)


Double-digit unemployment looms, OECD tells G8 (Reuters)

Sunday, March 29th, 2009 | Finance News

ROME (Reuters) –
The global economic crisis will hit jobs hard, with unemployment set to reach double digits in many developing and advanced countries, the Organization for Economic Cooperation and Development (OECD) said on Sunday.

"By the end of 2010 the unemployment rate could be approaching double digit figures in all G8 countries with the sole exception of Japan, as well as in the OECD area as a whole," the OECD forecast in a background paper to G8 labor and employment ministers gathering in Rome.

In new projections to be issued on Tuesday the OECD will forecast growth in the 30-nation bloc will contract by 4.2 percent this year, the Paris-based body's general secretary, Angel Gurria, told reporters on Friday.

The OECD had earlier predicted a 0.4 percent contraction, in November.

The paper released to reporters on Sunday projected that joblessness in the OECD area would increase in the three years to 2010 by more than it rose in the 10 years to the early 1980s, which included two oil shocks.

It forecast the area's economy would stage "a rather muted recovery" in the first half of 2010 if a series of conditions are fulfilled.

"Even this muted recovery rests on the assumption that tensions in financial markets dissipate toward the end of 2009, monetary and fiscal policies continue to be supportive and that growth will pick up in the non-OECD area," it said.

The OECD urged G20 leaders meeting in London this week to "intervene quickly and effectively to avoid the financial crisis becoming a full-blown social crisis with scarring effects on vulnerable workers and low-income households."

In a separate document prepared for the Rome G8 "social summit," which runs until Tuesday, the International Labour Organization warned that global unemployment could rise by 50 million this year, after an increase of 11 million in 2008.

John Evans, the leader of the trade unions in the OECD bloc, told reporters that workers' organizations should have formal representation at the London G20 to ensure that safeguarding employment is near the top of the agenda.

"Workers are paying the price of the crisis and anger is going to mount unless we get clear answers," he said.

The 30 nations which fund the OECD include the United States, Japan and the rich industrialized nations of Europe, while the narrower G8 is made up of the United States, Japan, Germany, Britain, France, Italy, Canada and Russia.


Obama: I told bankers bonuses ‘not acceptable’ (Reuters)

Sunday, March 29th, 2009 | Finance News

WASHINGTON (Reuters) –
President Barack Obama said on Sunday he told the chiefs of the biggest U.S. banks that bonuses are not acceptable while many Americans struggle to meet basic expenses in the midst of a severe recession.

Referring to a meeting Friday at the White House with the chief executives of banks that have received U.S. government bailout funds, Obama said bankers need to show some restraint from big bonuses during the financial crisis.

"That's just not acceptable," Obama said during an interview on CBS television's "Face the Nation."

He said he told the chief executives: "Show some restraint. Show that you get that this is a crisis and everybody has to make sacrifices."

Executive bonuses at troubled financial institutions, including insurer American International Group Inc, have sparked anger among U.S. lawmakers and the American public, who are outraged that the institutions doled out multimillion-dollar bonuses while receiving taxpayer funds instead of providing credit to individuals and small businesses.

Executives at AIG, which has received about $180 billion in taxpayer bailout money, were paid $165 million in bonuses. Many recipients of the bonuses have agreed to give the back. "Had we not seen some healthy expressions of anger, we wouldn't have gotten $50 million of those bonuses back." Obama said.

Attorneys general in New York, New Jersey and several other states are examining the AIG bonus matter.

Obama's meeting on Friday included the chief executives of JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp, Goldman Sachs, Citigroup Inc and Morgan Stanley, among others.

The meeting touched on several issues facing the banking industry, including reforming regulation and pushing soured assets off of banks' balance sheets as part of a plan involving the government and private investors.

Many of the CEOs said after the meeting that they are waiting for more details of the plan, which the Treasury Department envisions cleansing banks of up to $1 trillion of distressed loans and securities.

The Democratic president said in the CBS interview that the bankers acknowledged the public outrage. Obama said that it is not easy to ask taxpayers who follow the rules, but struggle with their mortgage payments and medical bills, to make sacrifices if banks are not doing the same.

"It's very difficult for me as president to call on the American people to make sacrifices to help shore up the financial system if there's no sense of mutual obligation ... and mutual help," Obama said.

"There's no separation between Main Street and Wall Street," he said. "We're all in this together.'

(Editing by Maureen Bavdek and Steve Orlofsky)