Last Sunday, the Obama administration ousted Richard Wagoner from his CEO and chairman post at beleaguered US automaker General Motors. Much of the public debate centered on whether or not the president had overstepped his authority by interfering with the management of a still private – though now federally dependent – company. Regardless of those issues, it was smart image management on the White House's part.
For one, it sent an obvious message about the new direction the administration plans to take with the automotive industry, and perhaps even other companies requesting significant federal funding support. Despite the president's assurance that “the United States government has no interest in running GM,” it clearly does believe it will do just that if necessary. At press time, the administration was expected to help begin replacing GM's board of directors, the same ones that voiced continued confidence in Wagoner during the automaker's decline. Clearly, the White House's message of tough love for failing companies isn't over, nor bound by the usual rules of corporate governance.
Moreover, the removal of Wagoner was a necessary step in remaking the brand of GM if it is to be saved, albeit a difficult decision, which the company's leadership had failed to grasp. Whether or not he was the best person to lead GM through its restructuring no longer mattered. Wagoner had come to represent the past failures of GM, rather than the way forward. And with the public out for blood for any executive perceived as contributing to the economic crisis or otherwise dragging it on, Wagoner had to go.
Of course there are a number of structural and operational changes that GM must address, but its management also needed a new face if the public and investors were to trust it again. The White House simply stepped in to do what was required.