By on September 20, 2010

This is a company that could not tell you, on any given day, within five hundred million dollars, how much cash it had… not only were they not prepared, but Rick Wagoner had very specifically said he didn’t want to prepare… frankly, it’s an irresponsible position [for a CEO to take].

What do you do when you’ve overseen a divisive bailout and an investment scandal all within the last year? Writing a book goes without saying, but it doesn’t hurt to bash on the executives you ousted while “Overhauling” the industry. That way, people who were (ahem) bearish on GM leading up to the bailout can at least be vindicated in their pessimism (and have the pleasure of imagining what might of happened if Ron Gettelfinger had been fired as Wagoner’s sacrificial lamb). In any case, that’s just what former auto bailout czar Steve Rattner has done in an interview with CBS News, and despite Rattner’s relentless striving to appear respectable and brave, it’s worth a watch. Especially in hindsight, pre-bankruptcy GM makes even Rattner look good.

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29 Comments on “Quote(s) Of The Day: Rattner Rides Again Edition...”


  • avatar
    psarhjinian

    That way, people who were (ahem) bearish on GM leading up to the bailout can at least be vindicated in their pessimism
     
    It’s not that  those of (most of) us on the opposing side thought that GM was some sort of diamond in the rough, it’s that we didn’t relish the idea of seeing a major employer (and keystone of other employers) take a powder in the middle of a recession.
     
    In 2005 I would have cheered on a dismemberment and in 2011 or so I might again.  In 2008?  Not so much.

    • 0 avatar

      Principles shouldn’t be situational. You’re either against federal interference in private industry, or you’re for it.

      Even in “certain” situations, rescuing failed, noncompetitive companies is still the wrong thing to do. If only our country had any backbone.

    • 0 avatar
      ClutchCarGo

      Well put. Timing is everything, something that is lost on the most vehement bailout detractors. Crashing GM on the heels of Lehmann Bros would have been disasterous beyond measure. And I still expect Chrysler to be dismembered down the road when an orderly shutdown can be done without causing another crisis of confidence in the markets the way Lehmann did.

    • 0 avatar
      V572625694

      “Principles shouldn’t be situational. You’re either against federal interference in private industry, or you’re for it.”

      There’s always been, and always will be, federal interference in private industry. When they gave railroads millions of acres of land to induce construction across the continent, that was federal interference. When they built a nationwide system of highways, that was federal interference. When they give oil and gas exploration a 25% tax break, that’s federal interference. In the 1800s when the feds kept tariffs high to foster growth of domestic industry, that was federal interference.

      It can’t be otherwise, never has been, and never will be, whether we like it or not. Under monarchies the king decided what the interference would be; in democracies it’s a little more complicated but just as intrusive.

    • 0 avatar
      psarhjinian


      Principles shouldn’t be situational. You’re either against federal interference in private industry, or you’re for it.

      Personally, I’m for, but for many pro-bailout people this wasn’t an issue of principle but one of pragmatism.  Here’s the difference:

      Case A: Ideological opposition or support:
      Pro-bailout: I think government should heavily regulate and backstop industry.  Heck, I think government should take over industry.  Pass the vodka and clove cigarettes, comrade!
      Anti-bailout: I think government shouldn’t touch industry with a ten foot pole.  In fact, I don’t think government should do anything.  Better yet, let’s abolish government!  Anarchy, baby, yeah, now let’s go shoot something!

      Case B: Pragmatic opposition or support:
      Pro-bailout: I think the economic harm of a major employer self-destructing in the maw of a recession is a bad thing.
      Anti-bailout: I think the long-term effects outweigh the short-term pain.

      The problem, and why both sides have spent a lot of time talking past each other, is that they assume their opposite number is an ideological whack-job rather than a pragmatist who just sees things different.

      Personally, I don’t want government socializing industry losses, but even worse is when those losses will cause me in particular and society in general harm, so I’ll hold my nose and say yes to the bailout.  Highly ideological socialists feel very different than this: they either get ill at the idea of subsidizing industry because it’s wealth redistribution in the wrong direction and/or they’d have preferred full nationalization to the milquetoast response the governments of the world actually took.

  • avatar
    OldandSlow

    The bail out didn’t get my vote because I didn’t see much strong leadership in either Rick Wagoner or Fritz Henderson, especially Wagoner.  I wonder if Ed Whitacre ever got the books in order.
     
    A very unclear point is whether and when GM has to repay that 50 plus billion dollars.  That used to be a lot of money.

    • 0 avatar
      CamaroKid

      A year, 18 months maybe I was with you, I was certain that there was 0% chance that the government would see ANY of the auto bail out money ever again.  Now, I’m not so sure.  Now it is almost 50/50 that the Government will recover most if not ALL of the 50 million needed to save GM… Chrysler?  That money is probably gone forever.

      Need a case study?  It doesn’t get much press, but the bailed out banks have been repaying the Federal government like crazy in the last 12 months… So much so that the 2010 Deficit was LESS then the 2009 Deficit! People hate to admit it, but the Stimulus worked, Tarp worked, the auto bailout worked.  

    • 0 avatar
      Daanii2

      Yes, the bailouts worked. These companies, which should have died, live. Because they were too big to fail, they were saved. And everything looks rosy.
       
      But it’s like rebuilding in a flood plain. Everything looks fine when the skies are clear. But the skies do not stay clear. Rain does fall. Then all hell breaks loose again. And this time, it’s even worse.
       
      Look at the Japanese economy. See what happens when you save companies from their own fatal mistakes. Lost decades.

      We had an opportunity to make some real changes. Do some real good. But that would have been hard. So we took the easy way out. The bill has not come due yet. But sooner or later, we will have to pay for that.

    • 0 avatar
      ClutchCarGo

      “We had an opportunity to make some real changes. Do some real good. But that would have been hard. So we took the easy way out. The bill has not come due yet. But sooner or later, we will have to pay for that.”

      It’s true that the bill must be paid, and it remains to be seen whether we will start making installment payments or just set the bill aside for “later”. But we simply could not afford to pay that full bill in late 2008/early 2009.

    • 0 avatar
      Daanii2

      But we simply could not afford to pay that full bill in late 2008/early 2009.

      That’s where we disagree. I think the bailout of GM and Chrysler did more harm than good.

      Who’s right? We’ll never know.

  • avatar
    PeriSoft

    “This is a company that could not tell you, on any given day, within five hundred million dollars, how much cash it had…”
     
    That sounds pretty bad, but it’s meaningless without the context of other manufacturing businesses of similar size. Lockheed? Boeing? GE? These are big-ass entities; I’m no accountant, but it seems like a problem that might for large companies be far more difficult than it is for a dude who has to log into his Chase account and look at the available balance…

    • 0 avatar
      daga

      The point is that they were running the company on the income statement and measuring by accounting profit and not cash flow.  Any company in the kind of perennial danger that GM was in ought to know how close they are to the edge.

    • 0 avatar
      Daanii2

      Any company in the kind of perennial danger that GM was in ought to know how close they are to the edge.

      My experience with troubled companies is different. I don’t think accounting plays much of a role. I’ve seen troubled companies with poor accounting do well. And troubled companies with good accounting do poorly. Ernst & Young and the other accounting firms insist that they can make a difference to a company’s survival. I don’t believe it.

      Rattner’s comment reminds me of when use of magnetic resonance imaging first became widespread. Orthopedic surgeons saw that many people with bad back pain had terrible looking spines. Bulging disks and all that. So they would operate and fix the problem. Trouble was, that did not usually relieve the pain.

      Then someone had the bright idea of looking at the spines of people of a similar age and physical condition as those with back pain, but who did not themselves have a problem. Their spines usually looked just as bad. Turns out that back pain and spines that looked bad when imaged were not related.

      Same thing here. So what if GM did not know how much cash it had? Rick Wagoner was right — it was stupid to focus on that because that was not the problem. Rattner had no way to know what GM’s problems were — he spent so little time there and had so little experience in business.

      Remember back when Henry Ford was still in charge and the company kept the cash it got instead of putting it in the bank? And when Ford would weigh its paperwork to see how much cash it needed? Didn’t seem to stop them from making money.

    • 0 avatar
      CamaroKid

      With modern online accounting, ERP systems and real time book keeping there is NO EXCUSE that any company shouldn’t know moment by moment where they are at. 

      I work at a company that brings in three quarters of a billion in annual revenue… And we know DAILY how we are doing, ahead of targets, behind targets, and we know exactly how much money is in the bank. And this is all run out of a Finance department with less then 60 people and a POS ERP system that runs on two 4 year old intel servers.

      There is NO excuse that a company like GM has messed up books.  Someone should be going to jail for that.

    • 0 avatar
      Daanii2

      There is NO excuse that a company like GM has messed up books.  Someone should be going to jail for that.

      Why? Why give such importance to something that does not matter.

      Good accounting can help. But it hardly ever makes a difference. Look at Enron. Their books looked great!

      I speak not as an accountant, but as a lawyer. Some of my in-house lawyer colleagues think that they are the reason for their company’s success. I just don’t see it.

    • 0 avatar
      CamaroKid

      Why? LOL!
      Enron Books looked great? LOL!

      Have you heard of this little thing called FRAUD? It kinda illegal in most States…

      You know that Kenny Boy was measure up for an Orange Sport-coat before he had a heart-attack.  His buddy Jeffrey Skilling got 24 years!

      You are aware that GM was sued by shareholders because of fraudulent book-keeping and the shareholders WON…

    • 0 avatar
      Daanii2

      Exactly my point. A company like Enron had its accounting down pat. Everything looked great. No sign of the fraud that was destroying the company.
       
      Accounting is a tool to run a company. Knowing how much cash you have, within five hundred million dollars, might be useful. It might not be useful. It’s like looking at the cleanliness of the CEO’s desk. Some people like clean desks. Some people like messy desks.

      Rattner coming in and making decisions on this kind of crap is stupid. To draw conclusions from this type of trivia is making a mountain out of a molehill. Pay attention to the mountains, not the molehills.

    • 0 avatar
      CamaroKid

      So as a lawyer you advise your clients to keep sloppy even fraudulent books?
      Management 101… If you can’t measure it you can’t manage it.  If you have no idea if you are winning or losing you end up making one stupid decision after another… Wagoner was/is a case study of a CEO who was making decisions with ZERO financial information and was a case study for stupid decisions.

    • 0 avatar
      Daanii2

      So as a lawyer you advise your clients to keep sloppy even fraudulent books?

      No, of course not. But I do advise my clients to focus on what is important. What is important is increasing your revenues and reducing your expenses. What is NOT important is knowing how much cash you have.  In my opinion.

      Wagoner had his faults. Financial knowledge was not one of them. He knew what he had to. He came up through GM’s finance group, and was its CFO. Love him or hate him, the guy was far from stupid.

    • 0 avatar

      Wagoner failed in purchasing, was responsible for losing gobs of market share running NAO, sold off everything not nailed down to feed the banks, but his biggest failure was financial.

      sorry Daanii2 but you’re incorrect about his financial acumen as evidenced by annual reports disclaiming “material weaknesses” that continue even to this day, and successful shareholder lawsuits over improprieites. he did not even have an accounting degree!

    • 0 avatar
      Daanii2

      but his biggest failure was financial”

      I agree wholeheartedly that Wagoner failed as GM’s CEO. But I have to disagree with you that his biggest failure was financial. As I’ve said, why should a CEO be worrying about how much cash you have on a particular day? You might as well judge him by how messy his desk is or how cute his secretary is as by what Rattner judged him by.

      Wagoner failed as CEO because GM’s expenses were higher than his revenues for an extended period, and he could not reverse that. That is the reason. What does that have to do with finance?

      As I said, I’ve worked with many troubled companies. I cannot think of a single one that failed because their finances were not in order. Usually that was the only thing they got right.

      But now we have people saying that someone should be going to jail because GM’s books were, or are, messed up? That Wagoner’s biggest failure was financial?

      I think you are looking at a molehill and calling it a mountain.

  • avatar
    jkross22

    Rattner’s interview makes it appear that all that was wrong with GM was Rick Waggoner.  Whitacre, to his credit, has gotten rid of a handful of others.  Have they truly culled the herd and gotten rid of the most influential bad players?  Unlikely, as the recent TTAC report on GM’s IPO announcement came with the caveats that GM may not yet have a handle on what the real financial situation is.
    I’m left believing that GM’s troubles are far from over and that this claim of profitability is yet another shell game being played.  This time, it’s on the taxpayer nickel.
     

  • avatar

    of course I could be wrong but it appears to me that the more things change…

    - Labor Day Red Toe Tag sale with lowered rates and down payment assistance for sub-prime customers

    - continued hairbrained, goofball, confusing incentive structure that is “worse than can be imagined”

    - stair stepped dealer cash programs that severely discriminate against smaller franchisees

    - further deterioration in retail market share while Toyota issues massive recalls under the worst PR imaginable

    - failure to understand “Brand” as evidenced by killing full sized Buick sedan and more alpha numeric lunacy

    - inability to produce a financial statement without “material weaknesses”

    - claiming $30 Billion in perceived ficticious assets

    - the “churn” now referring to executives’ musical chairs

    - dysfunctional has not left the building

    pssss…hey buddy, wanna buy some stock?

    Buickman
    Founder
    http://www.GeneralWatch.com

    • 0 avatar
      CamaroKid

      So sad, yet so true.  The GM stock will IPO, and initially it will be a hit, and the Government will get most, maybe even all of the money back…

      Then reality will set in, and all of GM’s continuing problems will bubble up and all of the people who bough the IPO on the WAVE of excitement will be left with stock worth $40, 30, 10, 5… 0.01….  Been there… Done that.

      I hope you are successful in getting GM to wake up THIS time. 

  • avatar
    bomberpete

    I just got the Rattner book last night and look forward to reading. Still, I do admit to a pre-conceived bias against any self-aggrandizing statements that GM is “fixed” or on the right track. Given the ragged handling of the Whitacre/Akerson transition, the IPO plan, and unclear books, Isuspect that Buickman and Camaro Kid are closer to the truth than anyone in charge will ever admit — unless under oath.

  • avatar
    Mike Kelley

    I think all the phony optimism about GM being on the mend is crap.  They crow about a couple billion in profit, yet they admit they will have to pay over $6 billion a year into their pension fund beginning in 2013 just to keep it solvent.  The GAO says the fund is already $26 billion short.  The only way they paid money back to the Treasury was by moving other government-provided loot around for appearances.  The lefty media are of course happy to help in the charade in a vain attempt to make Obama’s goofy policies look good.  The taxpayers will never be repaid.

  • avatar
    bomberpete

    Buickman — Who needs an accounting degree? Red Ink Rick has an MBA from Duke U.’s Fuqua School of Business. Isn’t that better?
    The question is rhetorical. Daanii2′s rationalizations make no sense to me.


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