GM CEO forced out in hard line by Obama auto team

The Obama administration on Monday seized the wheel of the failing U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. workers employed by the companies.
S&P 500 futures fell after the news, trading down 1.5 percent at 0500 GMT, while U.S. 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.
"The fact that there's still a chance of GM going bankrupt is shocking," said Takashi Ushio, head of the investment strategy division at Marusan Securities in Japan.
Rep. Thaddeus McCotter, a Detroit-area Republican, said the Obama administration had applied a double-standard in ousting Wagoner after letting bank executives stay on in their jobs.
"I want to know what the goal is for these companies," he told Reuters. "We have families that are scared to death. In Michigan, with 12 percent unemployment, we've got to be worried."
Chrysler, which is controlled by Cerberus Capital Management, was given 30 days to complete an alliance with Italy's Fiat SpA or face a cut-off of its government funding that could force its liquidation.
The autos panel rejected the claim by Cerberus that Chrysler could be viable on its own, citing its smaller size, weaker product line-up and declining U.S. market share.
If Chrysler can complete a tie-up with Fiat and cost-saving deals with creditors and its major union, the Treasury would consider investing up to another $6 billion, officials said.
U.S. officials said there had been progress in recent negotiations involving the task force. Fiat has agreed to take less than the 35 percent stake in Chrysler the two companies had first negotiated, the senior official said.
Meanwhile, Henderson, a key architect of GM's now-rejected turnaround plan, was charged with working with U.S. officials and advisers to develop a more aggressive restructuring.