Obama's restructuring plan for GM: Can CEO Wagoner

As a condition for granting General Motors another $9 billion in federal loans the Obama Administration asked Chairman and CEO Rick Wagoner to step down. Fritz Henderson, current GM president and chief operating officer, will be named the next CEO, effective immediately. In addtion, GM is working to replace the majority of its board in the coming months.

Last week, the President said he would set stiff conditions on further loans. Apparently Wagoner's resignation is the first of those strings.

The forced resignation sends a strong signal that the Obama administration is driving dramatic change and looking to hold CEOs accountable for corporate performance.

Wagoner had been with General Motors for 31 years, taking over as president in 2000. Since then, GM cars and trucks have become much more competitive, with many recent models performing well in Consumer Reports tests. The company, however, still hasn't cracked the reliability code yet. . Further, the company seems to have made a significant commitment to producing more environmentally conscious products.

Still, GM has not turned around fast enough to keep pace with competitors, nor the rapidly changing market conditions. As CEO, Wagoner has taken much of the blame in public for GM's problems, especially after disastrous Congressional hearings in November, when the heads of all three Detroit automakers went to Capitol Hill seeking aid, traveling on corporate jets.

The automotive market has seen dramatic shifts in the last year or so, with high gas prices and a credit crunch. Many think that car companies can change quickly to adapt to these market fluctuations. However, managing a company this size is akin to steering a huge oil tanker: you can't stop or turn on a dime. Truthfully, it takes about five years to develop a new car, and changing an entire vehicle fleet overnight is unrealistic. The best car companies, however, have a diversified product portfolio that allows them to more readily shift resources to what the market needs. Plus, GM didn't have many fuel-efficient cars to sell when the price of gas spiked – much like the position it was in during the early 1970s.

The next executive in the hot seat is Henderson, who is known for running GM Europe, Africa, and Asia, moving the GMAC finance division into home mortgages, and [temporarily] reviving Isuzu, according to Business Week.

Significant announcements are expected today and throughout the week from the White House, as well
as the automakers, and we'll continue to follow this developing story.

—Eric Evarts

Read "Obama says auto aid will come – with strings" and "Car buyers hesitant to buy from bankrupt automakers."