Wagoner Out at GM

Rick Wagoner has resigned as chairman and CEO of General Motors (GM). The move was part of a deal with the Obama administration for the car company to get more bailout money.

Unfortunately, GM faces many more hurdles in the weeks and months ahead. Rather than helping GM, the Obama administration’s agenda will probably hurt the company, specifically their “cap and trade” plans. Here’s what I wrote earlier this month:

“Why is cap and trade so important to GM? The reason is that the auto industry is very dependent on cheap hydroelectricity from Canada and coal from the U.S. So as Obama forces coal-fired power plants out of business, the era of cheap electricity in the Midwest will end which will place an even greater burden on GM and other auto manufacturers.”

The president’s task force to help the auto industry is expected to present its recommendations at the end of April. It will probably involve more money for the car companies in exchange for major concessions.

This is now bordering on desperation. Apparently, Obama is frustrated that Wagoner led the charge into SUVs and trucks, which is highly profitable, despite Obama’s desire to push fuel efficient vehicles. Even with union concession, GM will still not able to compete against Honda or Toyota due to its higher legacy costs. Those legacy costs will only grow more burdensome. If GM couldn’t compete while selling 17 million vehicles a year, selling 10 million a year won’t be any better.

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