General Motors chief executive Rick Wagoner is stepping down immediately at the behest of the White House, government sources said Sunday evening.
The news came a day before U.S. President Barack Obama announced plans to further help the struggling Detroit automakers restructure their finances.
It's expected that Obama's plans to reshape the companies will go much deeper than previously thought, and will increase Washington's role in what will likely be a painful process.
Just before the news broke that Wagoner was stepping down, Obama chided the Detroit Three automakers, saying they needed to do more in terms of restructuring in order to receive financial aid.
"They're not there yet," Obama told CBS News Sunday.
GM and Chrysler are now surviving on US$17 billion in loans from the U.S. government, and GM was expected to ask for another US$16.6 billion. The Canadian units of both companies are also seeking billions of dollars in loans from Ottawa.
Late Sunday, the White House handed both companies billions more so they can stay afloat.
It's unclear who will replace the 56-year-old Wagoner, who has been leading the company through the toughest financial crisis GM has ever faced.
He also leaves just before the company was expected to hand its finalized restructuring plans to the White House on Tuesday.
North of the border, GM Canada president Arturo Elias has said the company will save $1 billion after major changes to its business model and labour costs. A deal with the Canadian Auto Workers union is also expected to save another $1 billion in pension and healthcare costs.
The company plans to close its truck plant in Oshawa, Ont., this spring and its transmission plant in Windsor, Ont., in 2010, reducing GM's Canadian workforce to 7,000.
That's a major drop from about 20,000 people in 2005 and about 12,500 today.
Responding to the news, former CAW boss Buzz Hargrove said Wagoner's departure is a serious loss for the automaker and the industry as a whole.
"I'm shocked," he told CTV Newsnet Sunday evening.
Hargrove said that Wagoner would have been integral to a successful restructuring plan because of his vast knowledge and experience in the auto industry
"This is not good news," Hargrove said.
"Rick Wagoner is the one leader of all the companies that has incredible knowledge of the industry, of the company, and if there's a turnaround to be had, Rick Wagoner is the guy to lead it."
Hargrove said that Wagoner's departure indicates that the White House is now making demands "that will not be beneficial to GM.
"This shows an incredible frustration, I believe, on (Wagoner's) part with the demands ... by the committee set up by the Obama administration."
Hargrove noted that Obama and the White House should rethink their auto bailout strategy and let the experts sort the problems out themselves.
"They have to allow the people who know the industry (and) know the business make the changes -- nobody knows the business like Rick Wagoner," he said.
