The fall of General Motors Chairman and Chief Executive Officer Rick Wagoner was unavoidable. There is no way President Obama could hand out more billions to a management with a practically unblemished record of failure.

Yes, it's certainly good news; the Wagoner management was never going to turn around General Motors (nyse: GM - news - people ). Never. After all, Wagoner has been chief executive since 2000 and head of North American auto operations six more years before that. His predecessor and mentor, Jack Smith, became chief in 1992. GM lost market share in the U.S. in all but a couple of those years. The losses in Wagoner's last four years topped $80 billion.

Worse, GM seemed adrift in this crisis. Its European operations--and they are key to saving GM--seem to be without serious direction. In the U.S. we hear mostly of program cancellations, and the Vice Chairman Robert Lutz, the only real "car guy" in top management, is giving up and retiring at the end of the year.

But it might be a mistake to cheer Wagoner's leaving, because we don't know if his replacement will be any better. The second in command, the president and chief operating officer, is Fritz Henderson, and he is expected to succeed Wagoner, at least for now. Frankly, it is difficult to see what he did to become president of the once largest automaker in the world. Like Wagoner, he is a fairly colorless financial officer. But it's unfair to knock him before he's had a chance to do something.

What GM needs in this crisis, of course, is a spirited leader, a fighter, who can speak to the American people and convince us that GM is coming back. He's got to have a feel for the business, for the product, for the car buyer, and not just for the balance sheet. And he's got to be willing to wave the flag too in these desperate times. We're talking about the likes of Lee Iacocca, who brought Chrysler back, and George Romney, who saved American Motors. Finance men can be heroes too: Sergio Marchionne, who is leading the recovery of Fiat (nyse: FIA - news - people ), is a good example.

Rick Wagoner had some successes. The 0% financing offers after Sept. 11 might have kept the country out of a recession. He always pushed China. And hiring Robert Lutz, the retired president of Chrysler, to lead a GM product renaissance was an excellent move, although it showed how weak GM had become in products, so weak it needed an outsider to fix its cars.

But these strokes are overshadowed by the constant failures. Wagoner took over as chief of North American auto operations back in 1994. He was given the job by Jack Smith, although Wagoner knew nothing about the American auto business. He had been chief financial officer. At that time GM's U.S market share was 33%. The last month counted, February, the share was 18% and sinking.

And GM under Wagoner missed trend after trend: GM was late into crossovers, meaning sport utility vehicles built on car platforms, which are big thing now. GM was late into small SUVs, like Ford Motor's (nyse: F - news - people ) Escape or Honda's (nyse: HMC - news - people ) CR-V. GM was not only late in hybrids--it doesn't seem to understand that the lure is high miles per gallon, 40 to 50 miles per gallon. It's bringing out a Camaro now, years after Ford redid its Mustang and after Chrysler redid its Dodge Challenger. If anything represents GM vehicles under Wagoner, it might be the failed Pontiac Aztek, which was considered the ugliest American vehicle in modern days.

But Wagner's worst sin was to allow his company to build boring cars with outmoded engines and transmissions, just awful interiors and poor fits and finish. His administration showed disrespect for the product, the engineers who created it and the customers who bought it.

His administration allowed Toyota (nyse: TM - news - people ) to overtake GM and become the world's largest automaker, and next year it's likely that Toyota will become the No. 1 seller in the U.S. too. He not only lost the low and middle market to the Japanese, but he lost the luxury end to the Germans. GM's trucks and big SUVs were a success, but it was madness for a car company to ignore cars--and that was Wagoner's responsibility. By the time he realized that GM needed someone at the top who understood cars and hired Lutz it was too late.

To be fair, the latest collapse was caused by that $4 a gallon gasoline and then the recession, neither of which were of Wagoner's doing. But all those years of failure were.

He created the vanishing auto company. Oldsmobile closed; Saturn, Hummer, Saab and Pontiac to go.

How did he manage to stay on despite all the failures? First, the GM board of directors are pet rocks. Second, Rick Wagoner seemed to be a decent man. He didn't seem to pay himself grotesquely or live an obscene style. He had a pleasing personality. He just didn't understand the American car business. The Detroit and auto press were amazingly uncritical.

But he and his predecessor Jack Smith had created a management system that cut "car people" from top positions. And as GM suffered market share losses every year, the answer wasn't to create exciting cars to win back share but to go to the balance sheet to cut costs and sell off pieces of the company, like GMAC (nyse: GJM - news - people ), for cash.

Auto companies can be saved: In recent years Carlos Ghosn turned around Nissan (nasdaq: NSANY - news - people ) and Marchionne turned around Fiat. But the new billions from the government won't save GM, and all the recovery plans are meaningless. It will take leadership.

GMAC stays mum on debt swap

The financing arm of General Motors Corp. remained silent Monday on whether it had raised enough capital to become a bank-holding company and eligible for access to billions in federal bailout money.

Analysts have speculated that if GMAC (nyse: GJM - news - people ) Financial Services LLC doesn't obtain financial help it would have to file for bankruptcy protection or shut down, which would be a serious blow to parent GM's own chances for survival.

GMAC had received the Federal Reserve's approval to become a bank holding company last week, but the approval was contingent on the auto and home loan provider raising at least $30 billion in regulatory capital. The company had been attempting to raise the needed funds through a complicated debt-for-equity exchange that expired at 11:59 p.m. EST Friday.

In an e-mail Monday, GMAC spokeswoman Gina Proia said GMAC still had no news to announce regarding the debt swap. That came after Saturday e-mails that did not provide any specifics but said that GMAC planned to announce the results of the debt swap soon.

"The offer did expire yesterday at 11:59 p.m. as planned. We have not yet issued final results but intend to in the near term. I have no further comment on the exchange until then," Proia wrote Saturday.

Becoming a bank-holding company would both qualify GMAC to access the government's bank rescue funds and support GMAC loans to car buyers and GM dealerships. GM owns 49 percent of GMAC.

The Federal Reserve apparently needed to see that bondholders were willing to inject more capital into GMAC. The bondholders needed reassurance that the Fed would approve GMAC's application to qualify for federal aid.

If the financing company fails to become a bank holding company, it could mean severe consequences for automaker GM.

General Motors (nyse: GM - news - people )' ownership of GMAC has kept the finance arm lending to dealers and car buyers, even as credit from traditional banks has dried up. If GMAC goes under, other institutions aren't likely to step in to replace the credit lost by GM's dealers and customers.

The Fed's action Wednesday came as GMAC was struggling to get bondholders to convert 75 percent of their debt into equity of the company. It's been nearly two weeks since GMAC has released any information about the amount of participation so far.

As of Dec. 17, only about 16.9 billion, or 58 percent, of its GMAC notes had been tendered, along with about $3.5 billion, or 38 percent, of the notes issued by its Residential Capital LLC mortgage business.

GMAC's goal is to reach $30 billion in capital, the majority of which would come from the exchange of debt. Another part of the equity requirement included a demand from the Fed that $2 billion of the total come from new equity. So far, GMAC has received a commitment of $750 million from GM and private-equity firm Cerberus Capital Management, which owns the majority stake in GMAC.

It's unclear whether that funding would come from the $17.4 billion in bridge loans the U.S. Treasury granted GM and Chrysler LLC - which is owned by Cerberus_ earlier this month.

Some of the rescue money will be available this month and next - $9.4 billion for GM and $4 billion for Chrysler, which have said they could be facing bankruptcy soon without government help. GM is set to receive the remaining $4 billion in loans after more money is released from the financial rescue account.

It was unclear Monday exactly when the Treasury Department planned to release the first set of loans.

"We're making good progress finalizing the automaker loans and are committed to closing them on a timeline that will meet their individual near term funding needs," Treasury spokeswoman Brookly McLaughlin said in a statement.

GMAC has not said publicly how much it was requesting from the $700 billion bank bailout fund. CreditSights analyst Richard Hoffman estimated in a research note Friday that GMAC "could have applied for up to about $6.3 billion."

The Fed order says GM will reduce its stake to less than 10 percent of the voting and total equity interest of GMAC. GM's remaining equity interest in GMAC will be transferred to an independent government-accepted trustee who must dispose of the equity held in the trust within three years of the trust's creation.

Cerberus, which led an investment group that bought a 51 percent stake in GMAC from the automaker for $14 billion in 2006, will reduce its stake in GMAC to no more than 33 percent of total equity.

In afternoon trading, GM shares fell 27 cents, or 7.4 percent, to $3.39.

Associated Press Economics Writer Christopher S. Rugaber in Washington contributed to this report.

According to the White House plan to aid General Motors and Chrysler with money drawn from the $700 billion fund voted by Congress, Treasury Secretary Henry Paulson will temporarily oversee loans to the two ailing auto giants.

After Jan. 20, President-elect Obama will need to choose his own more permanent overseer. This person, identified as "the president's designee" in the failed Auto Industry Financing and Restructuring Act, is now widely referred to as the "car czar."
 

The imagery and reality of a car czar is fraught with problems. First of all, under what authority will this person be able to orchestrate sacrifices required by the carmakers, United Auto Workers, bond holders, and suppliers to make the loan recipients economically viable and competitive by March 31? It is by no means clear what power, apart from personal suasion, such a person would have to resolve disputes and align interests among key stakeholders during the coming months.

Furthermore, arriving at a plan for economically viability by March 31, as stipulated by the White House, will not save loan recipients from bankruptcy unless the financial community judges the carmakers' debt to be commercially bankable. This final and most important judgment is not for the car czar, the White House or even Congress to make.

So, with little formal authority to force changes in a 50-year-old business model and an extremely limited role in certifying the economic viability of business plans submitted by loan recipients, how can the car czar truly be a czar?

What's even more problematic is that the concept of a bridge-loan program with or without a car czar has a dream-like quality in the absence of an economic stimulus program that gets fast traction and an immediate increase in the availability of consumer credit.

Unless the volume of car and truck sales recovers to the industry's current break-even point of 14.5 to 15 million units per year from its current run rate of around 11 million units, the Big Three cannot remain solvent--czar or no czar. There is no near-term financial problem facing General Motors (nyse: GM - news - people ), or any other automaker, that a surge in volume wouldn't cure.

Ford Motor is suffering from guilt by association. The automaker has $15 billion or so in the bank and billions more in credit lines, is not looking for a year-end bailout and still gets splashed with mud. Every day I hear the TV news people, the stars like CNBC's Maria Bartiromo, lump General Motors, Ford and Chrysler together as facing bankruptcy. In Ford's case, this is just not true.

Alan Mulally, the chief executive Ford imported from Boeing (nyse: BA - news - people ), has moved smartly since he gave up his wings. He mortgaged assets (for $24 billion) and signed up credit lines two years ago before all the current turbulence.

He also sold Jaguar, Land Rover, Aston Martin, some of Ford's Mazda (other-otc: MZDAF.PK - news - people ) stake and has put Volvo on the block. You can disagree or agree, maybe some of these operations could still have turned into winning assets, but Mulally decided Ford did not need the problems right now.

Unlike GM, Ford has no surplus car lines, which means it avoids both heavy spending to keep too big a lineup up-to-date and endless lectures from Wall Street know-it-alls who say to get rid of them. Excluding Volvo, which Ford hopes to sell, and Mazda Motor, in which it has only a minority stake, Ford has only two dealership channels in this country: Ford and Lincoln/Mercury.

Both Ford and GM are unlike Chrysler in that they have robust foreign operations. For Ford, Europe and South America earned $2.5 billion pre-tax in the first nine months this year. Those markets are slowing, yes, but they are strong businesses. Europe is providing the small-car knowledge and engineering that Ford needs in the U.S.

Yes, Ford has asked for a government-backed credit line, just in case the economic downturn gets much uglier, and is asking for some of the government cash that Congress already appropriated for updating plants and making fuel-saving vehicles. On the other hand, Ford is not begging for an immediate cash infusion to keep it afloat.

Long run, Ford has the ability to grow. For the past two months the Dearborn, Mich., manufacturer has held its own in share against the prior year, while the others slipped. The company even picked up share in November, to 16.4% of the industry sales versus 15.4% a year before. This is a good sign. If GM downsizes, Ford could end up bigger than GM in just a few years.

This is a transcript of the Market Update: Close video report.

WASHINGTON, Dec 10 (Reuters) - The U.S. House of Representatives approved a bill on Wednesday to lend up to $14 billion to the three struggling U.S. automakers, General Motors Corp, Ford Motor Co and Chrysler LLC.

Introduced by Democrats, the bill is nearly identical to one pending in the Senate, where Republican opposition was making its chances for passage look uncertain.

The bailout proposal would extend taxpayer-funded loans or lines of credit to the Detroit Three and create a federal government post of 'car czar' to oversee the industry.

(Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn) Keywords: AUTOS/BAILOUT VOTE