Monday, March 30, 2009

Rick Wagoner Out as GM CEO

Oama administration has forced out GM CEO Rick Wagoner.  From WSJ:

The Obama administration used the threat of withholding more bailout money to force out General Motors Corp. Chief Executive Rick Wagoner and administer harsh medicine to Chrysler LLC, marking one of the most dramatic government interventions in private industry since the economic crisis began last year.

The administration's auto team announced the departure of Mr. Wagoner on Sunday. In a summary of its findings, the task force added that it doesn't believe Chrysler is viable as a stand-alone company, and suggested that the best chance for success for both GM and Chrysler "may well require utilizing the bankruptcy code in a quick and surgical way."

I have nothing against Rick Wagoner.  But I fail to see how he could have remained there for so long after running the company down the ditch.  Yes I am aware that the Unions are a big part of the problem. 

I am also glad to see the Obama administration finally use bankruptcy to their advantage.  After a bankruptcy, the company will evolve much stronger rather than providing a band-aid. 

This will also hurt the bondholders - it's worth remembering that bonds are risky also - for a bigger yield.

And the best news here is that they wont be helping a private equity fund by helping Chrysler.  I failed to see how anyone can justify bailing out Chrysler as it is owned by Cerebrus - by bailing out Chrysler, you are helping the private equity firm.


So let's hope the administration follows this strategy for the banks also.  Rather than keep putting unlimited amounts into banks - and by extenstion it's bondholders and stock owners - they just let the weakest banks go down.





The content contained in this blog represents the opinions of HousingDepression.
This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way - such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.  We may hold either long or short positions in securities of various companies discussed in the blog.  The information in blog may contain misspellings and other inaccuracies.  It is provided "As IS," without express or implied warranties of any kind.  HD represents all rights to the information.

No comments: