I disagree with your comment “Rattner is making a distinction between doing so based on ideological vs practical reasons, but saying that labor is more important than invested capital is indeed taking an ideological stance.”

Consider it from Rattner’s point of view: the government could provide capital, but not workers or suppliers – and the main point of the whole exercise was to keep peaple employed and suppliers from failing. Insisting on keeping the traditional capitol rank order would have been an ideological decision, doing what was necessary for the government funded bankruptcy to achieve its goals was a pragmatic one.

Actually, the Bush Administration didn’t have to do anything. There is no law or statute that entitles companies to a bailout by the federal government to avoid bankruptcy.

President Bush could have left both companies go bankrupt, and then let President Obama pick up the pieces.

Rattner’s account is about covering his own ass and methinks he protests a tad too much on the subject of no political or policy agendas at play.

Toxicroach pointed out one of Rattner’s contradictions. Here is another.

The lenders felt that this represented an ideological decision by the Obama administration to tilt in favor of labor and against capital. That was simply not the case. At no time during our months of work did the White House ever ask us to favor or punish any stakeholder.

Many other unsecured creditors — notably, suppliers and consumers holding warranties — actually received 100¢ on the dollar. The fact was, Chrysler had to have workers, suppliers, and customers to succeed and therefore needed to give them more than called for by their rank in the capital structure.

So on one hand Rattner says that this wasn’t about tilting in favor of labor over capital, but then justifies favoring giving the UAW more than “called for by their rank in the capital structure”, which is exactly tilting in favor of labor over capital.

Apparently Rattner is making a distinction between doing so based on ideological vs practical reasons, but saying that labor is more important than invested capital is indeed taking an ideological stance.

The plan is to keep both on life support until the economy recovers and the demise of both GM and Chrysler won’t send the economy spiraling further into depression.

True. It would be a dead company, liquidating in Chapter 7.

Unless one wishes to believe that there is a great Bankruptcy Fairy that was prepared to throw wads of DIP financing at the new company, the idea that there were alternatives to either Rattner’s managed outcome or a disorderly 7 is baseless.

There were no alternatives, because nobody in the private sector would have financed them. (That is, unless you had a multi-billion dollar lender in your back pocket ready to go, in which case you should have called GM to let them know about it.)

I contend there is simply not enough money, time, product and customers for the outcome to be anything other than this.

Yeah, incomin’ left and right, but he was out the door in a few weeks. In some places that would be called NEGLIGENCE.

It’s not as if the problem “crept” up on them after hearings in late October.

I think the best you can say is that it fits with the “throw money, no accountability” behaviour.

If I were Dr. Goolsbee, I’d call that a tie, if not a win.

In fact, when it comes to GM I’m just plain tired.

Exactly. It was completely possible to kill Buick in the US and keep it in China.

However, if you are going to keep GMC, you might as well keep Buick, so GMC dealers have some cars to sell on the side. Heck, killing Pontiac but not killing Buick and GMC as well is a questionable move for this reason, IMHO. I would have either kept all three or killed all three (keep Buick in China no matter what). Pontiac-Buick-GMC was/is one sales channel with three names.

That’s a fairly major quote, isn’t it?

You mean, even more quickly towards liquidation? Rattner’s characterization of the government as the reluctant investor of last resort makes perfect sense to me. You really see the bankruptcy coming off any other way than it did? I understand the government’s only major concern as either preventing or delaying some massive social dislocation–that still seems quite likely, if not actually inevitable.

Enough said!

It is managements job to keep the union in check,,,, therefore I agree with you…. “stunningly poor management”

Wagoner should have been fired long ago for this specific failure!

Had the GM bankruptcy proceedings occurred as they should have, free of government arm twisting, we would likely see a very different GM than what we see now, or perhaps a GM moving a different direction.

“stunningly poor management”

Enough said!

Again their plan was never to rescue GM and Chrysler. It was to delay their inevidable liquidation fate to a day a couple years down the road, after the rest of the economy had recovered and a collapse of these 2 companies wouldn’t have as much of an impact. The fact that they appointed the CFO proves that.

I’d love to know what questions Mullaly asked Wagoner. Maybe, “Was killing Oldsmobile worth it?”

You know, at one time a Detroit Big 3’s CEO would have to be very careful of any conversations with his counterpart at another Big 3 company. Years ago, when Detroit had pricing power, the Justice Department was always ready to suspect price-fixing.

The group was torn (at one point the vote was four to four) and so were Tim, Larry, and I. We intuited that from a theoretical point of view, the correct decision could well be to let Chrysler go. But this was not an academic exercise….

Well at least four of Obama’s advisors had a modicum of sense. Unfortunately, it was not an academic exercise. It was a political exercise, and that necessitated pumping billions of dollars down a rat hole named Chrysler to the detriment of GM and even more so Ford.

I do wish Rattner had pushed for a much more radical makeover of GM management.

Heh, heh. Yeah, you bet you aren’t in charge of canning someone who as someone here said represents 50% of the problem. You don’t touch the anointed one’s friends and allies – ever!

Wow. All this time, the reputation was that if GM could do ANYTHING well it was finance. This was the reputation for years, that the place was run by finance guys who had no feel for product.

Now we find out that the finance operation was hollow. And even better, the guy in charge of that operation is now runing the company.

This is reminiscent of Chrysler. Before Iacocca, the company had been run by finance people for 15 years. Iacocca figured that if nothing else, the finance operation was in decent shape. He turned out to be very wrong, because he found no financial controls to speak of. But there, new top management brought in new people to implement some modern financial controls. Chrysler went on to become a very well run company before Robert Eaton (a GM alum) engineered the sale to Daimler Benz.

In all fairness, I don’t think Bush had the time to demand that level of change. This all happened in the final days of his administration, when he was already a lame-duck president. Simply demanding that heads should roll without examining the entire company would not have been a wise move.

And I write this as someone who thought (and still thinks) that the Obama administration made the correct move in sacking Wagoner. If anything, they probably shouldn’t have stopped there…

Read this article, and then read John DeLorean’s book, On a Clear Day, You Can See General Motors, written in 1979…what’s shocking is how little the GM culture had changed between now and then, despite the dramatic changes undergone by the U.S. auto market during those years.

Say what you will about the Automotive Task Force and Obama, but I think they did a great job.

The biggest mistake? Keeping Chrysler. But I can understand the fallout (estimated at 300,000 jobs) would have potentially tipped the U.S. economy into a full-flung depression.

My favorite quote was the GM typified a ‘friendly arrogance’. Anyone who has worked with GM or its executives would say that nails what these douchebags are like.

You are either very rich, or have an intense desire to work for minimum wage

I, like most people I know, am paid the market rate for my labor. The UAW insisted that GM pay wages far above the market rate. When that happens a firm isn’t allowed to build up sufficient cash reserve and invest in R&D, the end result is usually bankruptcy.

The UAW drove GM into bankruptcy and I don’t think there is any way you can argue that UAW greed isn’t at least 50% responsible.