General Motors' former leadership was "appalling" and the company had no idea how much cash it had on hand, the Obama administration's former "car czar" says.
Steven Rattner is the Wall Streeter called on by President Obama to lead his auto task force in February 2009. Before resigning from the post in July of that year, Rattner led the team at the Treasury Department that kept GM and Chrysler alive. His new book, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry, provides a peek under the hood at what it took to save two of America's automotive giants.
GM Vs. Chrysler
The case for saving GM was much stronger than for saving Chrysler, as GM's prospects were better and its collapse would have been more devastating. The Obama administration was divided on whether Chrysler should be rescued. Rattner was among the advisers gathered in the office of Larry Summers, head of the National Economic Council, to prepare a recommendation for Obama on the Chrysler decision.
"It was at one point 4-3 against saving Chrysler," Rattner recalls, "and then after a lot of hemming and hawing on my part, I came to the view that at this moment in the economy, staring down into the black hole of potentially an economic abyss, was not the moment to let Chrysler go when it could be saved."
Firing The CEO Of GM
The task force, with the support of the White House, also called for the resignation of former GM CEO Rick Wagoner in March 2009. Rattner felt that new leadership was essential to seeing any results from the U.S. government's investment in GM.
"It seemed obvious to all of us that it's very hard to put that amount of new money behind a CEO who's not only driven the bus off the cliff, but doesn't even realize where the bottom of the cliff is and what has to be done to get back up to the top of the mesa, if you follow the analogy," Rattner tells NPR's Robert Siegel.
An 'Appalling' Culture
In a word, Rattner describes the culture of GM under former leadership as "appalling."
"GM could not tell you on any given day within $500 million how much cash they had, and the result was they had to operate over $10 billion, sometimes $11 billion, of cash — far more than any other company of its same size or scale," Rattner says.
In his new book, Rattner writes, "The auto rescue succeeded in no small part because we did not have to deal with Congress," which had already appropriated funds for the auto bailout during the end of the Bush administration.
"If we had had to go to Congress, and had gone through the normal legislative process that we've all now witnessed with health care, with financial regulatory reform, I think it is almost without doubt that at least one of these automakers would have collapsed, run out of money, and shut their doors before Congress got around to figuring what to do about it," he says.
Sacrifices To Serve
As a former reporter for The New York Times, Rattner brings special experience to writing his account of the auto industry rescue in Overhaul.
It was his years as a successful financier, however, that caused complications in the vetting process for his post as car czar. Rattner says the $400,000 in legal costs he incurred to be appointed is an example of the sacrifices of leaving the private sector for the public arena. While he thinks the money he spent was an exception to the rule, he says the bar is still set too high for those in the private sector who wish to serve their country.
"They simply wouldn't do it, and I think, while there are great people in Treasury, great people in the White House, that's a really bad outcome for the country not to attract the best and the brightest, particularly when you have an economic and financial crisis of the sort that we were facing."