Key senator calls for GM head to step down

December 7, 2008 5:14:13 PM PST
An influential senator drafting a multibillion-dollar bailout for Detroit's Big Three automakers said Sunday that the head of General Motors should step down, while President-elect Barack Obama accused car industry executives of a persistent "head-in-the sand approach" to long-festering problems. Sen. Chris Dodd, D-Conn., chairman of the Banking Committee, said GM CEO Rick Wagoner "has to move on" as part of a government-run restructuring that should be a condition of financial life support for the auto industry.

"I think you have got to consider new leadership," Dodd said on CBS' "Face the Nation." Criticized for staying on the sidelines until now, Obama for the first time voiced support for bailout legislation being drafted in Congress.

The sharp criticism from Obama and Dodd reflects deep frustration on Capitol Hill at what many lawmakers regard as years of missteps, mistakes and arrogance by the Big Three automakers. At the same time, Washington is deeply worried about soaring unemployment - 533,000 jobs were lost in November alone - and the impact of an auto industry collapse on a nation already deep in recession.

Behind the scenes, House and Senate aides were hammering out legislation that would dole out billions to automakers within a week - but yank back the money if a government-run board and overseer named by President George W. Bush decided the companies weren't taking steps to overhaul themselves and become viable. A congressional aide outlined the emerging measure on condition of anonymity because it is not yet completed.

The plan would draw the emergency aid from an existing loan program meant to help the automakers build fuel-efficient vehicles. The size of the package hasn't been finalized, but it is expected to be about $15 billion, several congressional aides said.

It would create an oversight board comprised of key Cabinet secretaries - from the departments of Treasury, Energy, Labor, Commerce and Transportation - plus the Environmental Protection Agency administrator to oversee a broad auto industry restructuring.

In return for the money, the carmakers would have to agree to terms similar to those placed on banks that receive funds under the $700 billion Wall Street bailout: to limit their top executives' pay packages, cease paying dividends, give the government a chunk of future gains and guarantee that taxpayers would be reimbursed before any other shareholders, the aide said.

The bill under discussion would place the special investigator overseeing the bank rescue in charge of keeping tabs on the auto bailout.

The White House and Democratic congressional leaders are narrowing their differences over the auto bailout, but had yet to agree on specific legislative details, officials said.

In an appearance on NBC's "Meet the Press," Obama said Congress was doing "the exact right thing" in drafting legislation that "holds the auto industry's feet to the fire" at the same time it tries to prevent its demise.

General Motors Corp. and Chrysler LLC, in particular, have warned they could run out of money within weeks, and Ford Motor Co. may need help if the economy deteriorates further.

GM spokesman Steve Harris said the company appreciates Dodd's support for the loans, but added, "GM employees, dealers, suppliers and the GM board of directors feel strongly that Rick is the right guy to lead GM through this incredibly difficult and challenging time."

Last week, The Associated Press asked Wagoner if he would resign at the request of Congress, to which he replied, "It's not clear to me that experience in this industry should be viewed as a negative, but I'm going to do what's right for the company and I'm going to do it in consultation with the board."

Democratic Sen. Carl Levin of Michigan, whose state is ground zero for the battered industry, told "Fox News Sunday" he was confident an agreement would emerge within the next day.

Democratic leaders have said they hope to pass the measure this week. While Levin declined to predict its approval, support among rank-and-file lawmakers presumably would improve dramatically if both White House and Obama were to signal their backing once the legislation is complete.

"The last thing I want to see happen is for the auto industry to disappear, but I'm also concerned that we don't put $10 billion or $20 billion or $30 billion or whatever billion dollars into an industry, and then, six months to a year later, they come back hat in hand and say, `Give me more,"' Obama said.

Obama, who takes office Jan. 20, has drawn some criticism from Democrats who want him to become more involved in efforts to save the industry. The president-elect said his aides are monitoring developments and considering longer-term plans.

He expressed no support for calls to allow the big carmakers to enter bankruptcy and said, "We don't want government to run companies." Instead, he said, "if taxpayer money is at stake - which it appears may be the case - we want to make sure that it is conditioned on an auto industry emerging at the end of the process that actually works, that actually functions.

Obama did not single out any individual executive by name for criticism, and said there had been incremental progress in the past 15 years toward a more competitive line of products. "What we haven't seen is a sense of urgency and the willingness to make tough decisions," he said.

Asked whether the top executives should remain in the jobs, he said: "Here's what I'll say, that it may not be the same for all the companies. But what I think we have to put an end to is the head-in-the-sand approach to the auto industry that has been prevalent for decades now."

Later, at a news conference, he appeared to temper his comments, saying that current management should be ousted if it doesn't understand the urgent need to make changes in the industry.

A breakthrough on the long-stalled rescue came Friday when House Speaker Nancy Pelosi, D-Calif., yielded to President George W. Bush on a key point: allowing the aid to come from an existing fund set aside for the production of environmentally friendlier cars.

The Big Three executives spent two consecutive days on Capitol Hill last week pleading for as much as $34 billion in loans to help their industry survive. GM and Chrysler made clear that $15 billion would be enough to keep them running until the end of March 2009.

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AP Auto Writer Tom Krisher in Detroit contributed to this story. Davis reported from Washington.


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