GM chief quits, US govt takes over automaker

WAGON-ER WHEEL: Rick Wagoner at a news conference at GM Headquarters in Detroit.

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Washington: The Obama administration on Monday seized the wheel of the failing US auto industry, forcing the ouster of General Motors Corp's chief executive, pushing Chrysler LLC toward a merger and threatening bankruptcy for both.

The steps, outlined by the White House autos panel headed by former investment banker Steve Rattner, marked a stunning reversal for management at both automakers and took aim at GM creditors who had bet that the administration would rescue the top US automaker.

Instead of granting GM's request for up to a further $16 billion in loans, the administration pledged only to fund GM's operations for the next 60 days while it develops a more sweeping restructuring plan under new leadership.

GM CEO Rick Wagoner, who had presided over the company's rapid decline in the past five years and had run the automaker since 2000, was forced out effective on Monday at the request of Rattner.

A majority of GM's board will also be replaced. GM President and Chief Operating Officer Fritz Henderson, a Wagoner protege, was named as new CEO.

"On Friday, I was in Washington for a meeting with administration officials," Wagoner said in a statement. "They requested that I 'step aside' as CEO of GM, and so I have."

The forced resignation came at a time when the Obama administration has come under fire for not blocking bonuses to executives at American International Group Inc.

It was only the second time that the US government has forced the ouster of a CEO in a bailout since the financial crisis began last fall. Robert Willumstad lost his job at the helm of AIG in September in connection with the US government's then-$85 billion rescue of the giant insurer.

Most analysts had expected the administration to take a softer line with GM and Chrysler after it had signaled its intent to protect jobs for the 160,000 US workers employed by the companies. S&P 500 futures fell after the news, trading down 1.5 percent at 0500 GMT, while US Treasuries futures hit a session high.

Shares in Japanese automakers such as Honda Motor Co and Mazda Motor fell around 7 percent on concerns about the broader industry impact of the failure of one of the major U.S. producers.