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Chief Fights for G.M.'s Future and His Reputation
DETROIT — Rick Wagoner cannot afford to leave Washington this week without at least $10 billion in federal aid to keep General Motors in business.
But a major question for Mr. Wagoner, G.M.'s chief executive for the last eight years, is whether he will return to Detroit with his job as well.
While the heads of the Ford Motor Company, Chrysler and the United Automobile Workers are scheduled to also testify before Congress on Tuesday and Wednesday, it is Mr. Wagoner and his company that have become the lightning rods of the debate over whether Detroit should get a bailout.
G.M., the largest American automaker, is in desperate need of cash to survive the worst vehicle market in the United States in 15 years. Mr. Wagoner has, so far, led the industry's intensive lobbying effort to get federal loans for all three companies.
Like Lee Iacocca, Chrysler's chief in 1979, Mr. Wagoner has the tall task of convincing skeptical Republican lawmakers to back a Democratic plan to save Detroit.
But unlike with Mr. Iacocca, Mr. Wagoner's 31-year career at G.M. has not been built on personal charisma and the art of the deal. Instead, he is seen as the leader of a company that has lost $20 billion in the first nine months of this year alone, as its stock price has dropped into the low single-digits from more than $30 a share a year ago.
The company's cash cushion is shrinking so fast — by more than $2 billion a month — that it has said federal help is needed to keep it from running out of sufficient cash for its operations by the end of the year.
Mr. Wagoner has said that despite its perilous financial condition, G.M. has no plans to file for bankruptcy, or even prepare for the possibility that it may need to seek Chapter 11 protection. But that is the clear threat.
"G.M. is the biggest of the three and it's in the worst shape," said John Casesa, principal in the auto consulting firm Casesa Shapiro Group. "I think it would be a pretty big blow to Rick if they don't get the money."
The debate on Capitol Hill will focus on whether the Detroit automakers can get $25 billion in aid immediately from either the Treasury Department's $700 billion financial rescue program, or from an existing loan program aimed at improving the fuel-efficiency of Big Three vehicles.
Ford and Chrysler, however, have not made the same dire predictions about their businesses — putting the urgency of the bailout squarely on the shoulders of Mr. Wagoner and G.M.
Some members of Congress have suggested that a management change is necessary at G.M. before any loans can be made.
"I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers," said Senator Richard Shelby, the ranking Republican on the Senate Banking Committee, which holds its hearing on the bailout on Tuesday afternoon.
The lanky, 6-foot-4-inch Mr. Wagoner, a 55-year-old former Duke University basketball player and Harvard Business School graduate, has refused to consider resigning even if it would help G.M.'s chances of getting emergency aid.
G.M. has declined to make Mr. Wagoner available for interviews. In a Nov. 10 interview with the trade journal Automotive News, however, he said that a change in management at G.M. would not be wise at such a crucial time for the company. "I don't think it'd be a very smart move," he said. "I think our job is to make sure we have the best management team to run G.M. It's not clear to me what purpose would be served."
A spokesman for G.M., Tony Cervone, said Monday that the G.M. board remains supportive of Mr. Wagoner, who became G.M. chief in 2000 and added the chairman's title three years later. Mr. Wagoner was paid about $24 million a year in 2006 and 2007 from a combination of salary, stock option grants and other forms of compensation. His 2008 base salary is $2.2 million.
"A solid management team is the most important thing you need in the time of a crisis," Mr. Cervone said.
But Mr. Wagoner has some convincing to do in Congress to show that G.M.'s team can pull it out of a downward spiral of shrinking market share and mounting losses.
Stoic and unemotional in public, Mr. Wagoner has been rigidly protective of G.M.'s strategy to expand internationally while downsizing its North American operations.
A few years back, Mr. Wagoner said G.M.'s goal was to be "both big and fast." Yet the company has made agonizingly slow progress in reshaping its product lineup in the United States to focus less on large vehicles and more on the smaller, more fuel-efficient cars.
Moreover, G.M.'s startling admission on Nov. 7 that it was spending down its cash reserves by more than $2 billion a month caught analysts and investors by surprise.
As recently as July, G.M. said it had a plan to bolster its liquidity by $15 billion through cost cuts, asset sales, and new borrowing.
Wall Street has responded to G.M.'s sudden cash crisis, and its plummeting sales, by driving its stock price to levels not seen in more than 60 years.
"In the eyes of the street, G.M. is now in a permanent liquidity crisis," Mr. Casesa said.
Mr. Wagoner is saying that without federal aid, G.M. could run out of money and drag down Ford, Chrysler and countless suppliers, dealers and small businesses.
"This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating," Mr. Wagoner said in an appearance Sunday on a television news program in Detroit.
Yet in the same appearance, Mr. Wagoner also said, "Our basis business is in as good a shape as it's been for 30 or 40 years."
If Mr. Wagoner cannot sway Congress this week to come to G.M.'s aid, the company will be forced to hang on until President-elect Barack Obama takes office in January and presents his own auto bailout strategy.
"That might be the most rational approach, to see what type of plan Mr. Obama and the new Congress will take," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
Mr. Cole, who has known Mr. Wagoner for nearly 30 years, said he hopes that any decision on his future with G.M. is not taken lightly by officials in Washington.
"I hope they take a deep look at what G.M. has done to fix its business, make an assessment, and then pass judgment," he said. "Knowing Rick, whatever is best for the company is what he will do."
