Rattner On His Detroit Adventure

Edward Niedermeyer
by Edward Niedermeyer

Former head of the Presidential Task Force on the Auto Industry, Steve Rattner has penned a retrospective for Fortune on his time guiding the auto industry bailout. He covers everything from how he assembled his team and developed a strategy to the decision to fire Rick Wagoner and the showdown with Chrysler’s creditors. There are no real surprises if you’ve followed TTAC for the last year or so, but it’s fascinating stuff to read coming from the horses mouth. Take Rattner’s initial impressions of the GM “culture thing”:

Everyone knew Detroit’s reputation for insular, slow-moving cultures. Even by that low standard, I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company.

For example, under the previous administration’s loan agreements, Treasury was to approve every GM transaction of more than $100 million that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures.

Rattner also recalls that the Chrysler bailout was far less of a sure thing:

Austan Goolsbee, a fearless former University of Chicago economist who had been with Obama since the beginning of his campaign, led the charge against Chrysler, marshaling strong factual arguments. One was that letting Chrysler go would give a needed boost to GM (and also to Ford), since most buyers of Chrysler’s strongest products — trucks, minivans, and Jeeps — probably would turn instead to the other Detroit automakers.

Harry maintained that a Chrysler liquidation could potentially add billions of dollars a year to GM’s operating income in a normal sales environment, vastly increasing the value of the company.

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…. We did not believe we could underwrite its viability without a strong corporate partner, so we turned our attention to that single possibility, an overture from Fiat.

And, at the risk of reprinting a full quarter of the piece, here’s Rattner’s recollection of canning of Rick Wagoner:

I don’t know whether Rick had any inkling of why I had wanted to see him alone. His face was impassive as I said, “In our last meeting, you very graciously offered to step aside if it would be helpful, and unfortunately, our conclusion is that it would be best if you did that.”

I told him of our intention to make Fritz acting CEO and he supported that idea, cautioning me against bringing in an outsider to run the company. “Alan Mulally called me with questions every day for two weeks after he got to Ford,” he said.

As we continued our rather awkward conversation, Rick suddenly asked, “Are you going to fire Ron Gettelfinger too?” Startled by the reference to the UAW head, I replied, “I’m not in charge of firing Ron Gettelfinger,” and Rick soon left to brief his board on our decision.

Later, I spoke to Fritz, who expressed enthusiasm for his proposed promotion but asked that he not be called “interim” CEO. “You can fire me anytime you want, but at least give me a better chance to succeed,” he said. We agreed.

Read the whole thing. [Hat Tip: 97escort]

Edward Niedermeyer
Edward Niedermeyer

More by Edward Niedermeyer

Join the conversation
2 of 46 comments
  • Geeber Geeber on Oct 22, 2009
    PeteMoran: It’s not as if the problem “crept” up on them after hearings in late October. 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.
  • Shiney2 Shiney2 on Oct 22, 2009

    @ Ronnie Schreiber 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.

  • Golden2husky Have to say he did an excellent job on the C7, especially considering the limited budget he was given. I am very happy with my purchase.
  • Marty The problem isn't range; it's lack of electricity in multi-unit building parking. All you need is level 1 - a standard 120v wall socket - and if you're plugged in 10 hours overnight you get 280 miles per week or more. That's enough for most folks but you can use public charging to supplement when needed. Installing conduit circuits and outlets is simple and cheap; no charge stations needed.
  • 2manyvettes Tadge was at the Corvette Corral at the Rolex 24 hour sports car race at the end of January 2023. During the Q&A after his remarks someone stood up and told him "I will never buy an electric Corvette." His response? "I will never sell you an electric Corvette." Take that Fwiw.
  • Socrates77 They're pinching pennies for the investors like always, greed has turned GM into a joke of an old corporate American greed.
  • Analoggrotto looking at this takes me right back to the year when “CD-ROM” first entered public lexicon