Former Car Czar Rattner Talks Some More about Auto Bailout

And our writer takes aim at part of that intervention

By Brendan Moore


Fortune, the business magazine, published an approximately 6000-word piece this week about the federal bailout of GM and Chrysler by Steve Rattner, a former Obama administration “car czar”, former private-equity master, and all-around business wheeler-dealer.

Steve Rattner head shotIt’s a interesting piece, filled with good observations, drama and some commentary about Detroit automakers and the bankers that surrounded them in the days leading up to the government takeover of Chrysler and GM. Rattner is still a very good writer, even though he hasn’t been a New York Times reporter for decades.

But, despite the length of the Fortune article, Rattner’s most interesting comments about the government assistance to GM and Chrysler probably occurred on Wednesday, the same day the Fortune article came out, during a relatively short speech at the Brookings Institute in Washington, D.C.

In that speech, as reported by The Washington Post, Rattner allows as to how the $20 billion USD that the Bush administration lent to GM is probably gone forever.

Rattner stated, “I don’t think we are going to see [it] again.”

But, Rattner said, he feels pretty good about getting the $30 billion back that the Obama administration (Rattner’s former employer) lent to GM. Rattner was very careful in his speech to draw a distinction between the money GM got from the Bush administration with basically no strings attached, and, the money GM got from the Obama administration, which was lent after a government-approved restructuring plan was put into place.

Rattner went on to say that he thinks the current GM is probably worth somewhere around $25 billion at this moment.

Well. The first thing I have to say is, “Wow”. So, at least 20 billion dollars has already disappeared, just like that. That’s billion, with a “b”. It’s not 20 million, its 20 billion dollars.

Second, it may make the Obama administration feel better (and it definitely makes them look better) to wall off the $20 billion the Bush administration previously threw at GM from the $30 billion the Obama administration lent them, but the American taxpayer is on the hook for the whole $50 billion, no matter who acted as the taxpayer’s proxy in the transactions.

I applaud the Obama administration for getting some deliverables written into the loan agreement they fashioned with GM, and I really hope that it matters, that is, that GM doesn’t go under anyway, but, it’s all money from the taxpayer, no matter what the terms.

So, we got that going for us. Which is nice.

The other related subject that Rattner elaborated on in his speech was how difficult the decision was regarding whether Chrysler should be saved at all, under any terms.

Quoting The Washington Post article, which is quoting Rattner, “The decision to save Chrysler, which was “larded up with debt” and “hollowed out by years of mismanagement” was more difficult, and internal discussions went back and forth over whether to make the effort. Chrysler, they noted, had not one car that was recommended by Consumer Reports.

From “a highly theoretical point of view,” the right decision might have been to “let Chrysler go,” Rattner said. But “facing a short-term job loss of 300,000 amidst the worst downturn since the Great Depression, a liquidation felt like an unacceptable risk if Chrysler could be viable.”

I have stated here in the past that I thought Chrysler was not worth saving. I made that statement before the decision was made to save it. I am still convinced of the correctness of that point of view.

Because not only did Chrysler make mostly lousy cars, had poor management and was loaded up with debt, but, just as importantly to me at the time, they had absolutely nothing in the pipeline in terms of future product that could make a difference in market impact. Nothing.

But, I chalk up the omission of this important fact in Rattner’s statement to the fact that Rattner, although he was appointed car czar by President Obama, had no experience specific to the auto industry. As bad as Chrysler looked to him, it was actually worse, if he had just known a little more about the business.

GM, at least, had some good/great product on the blacktop, and, had a pretty good pipeline of good/great near-future product on the way. I believe that it was the right thing to do for the federal government to intervene regarding a GM bailout.

But, if I had been the car czar, Chrysler would have been cut loose to die a natural death. The survivors of the American auto industry, Ford and GM, get more attention, and hopefully, most of Chrysler’s customers. There would have been no mixed feelings or equivocation about the decision from my perspective. So, it’s interesting to me that the decision by the auto task force to save Chrysler is characterized as being such a close call by Rattner.

As far as I’m concerned, all the government did vis-à-vis Chrysler was to provide capital financing for Fiat to re-enter the North American market. The body of Chrysler was put on life support long enough for a new host to enter it, that’s all. Chrysler is effectively a zombie corporation (dead, but still staggering around, menacing US taxpayers) until Fiat’s great small cars can breathe life back into what will then be the company that used to be Chrysler.

I have nothing against Fiat, in fact, I’m looking forward to seeing their vehicles here in America again. And, I think they got a pretty good deal out of this situation – they’re back in the second-largest new vehicle market in the world, and they’re financing that expansion with the time-honored OPM (other people’s money). It’s just that the other people in this instance are the American taxpayers.

I would have made a different decision concerning aid to Chrysler.

The Fortune article is a fascinating read if you’re interested in the car business and those events leading up to the federal bailout; it’s well worth the investment of time on your part to go through Rattner’s defense of what the auto task force did, and why. Regardless of what happens with GM and Chrysler in the future, there will be more written about the bailout “event” and the all the players that were at the table. Rattner’s take on it as one of the primary insiders is revelatory, even if you don’t agree with his point of view all the time.

COPYRIGHT Autosavant – All Rights Reserved.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at

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  1. As painful as it would have been in the short term, I would have shut both of them down.

    I agree with you about Chrysler, though. GM is a close call. Keeping Chrysler around and throwing more money down that rat hole is indefensible.

  2. Another big plus GM has that Chrysler doesn’t – thriving business in China that makes a lot of profit.

  3. Like every auto industry commentator, you miss the forest for the trees. Rattner came right out and said the reason they put money into Chrysler was to save jobs in an economy on the verge of a depression. He didn’t miss anything on Chrysler’s viability; the Obama administration simply wasn’t willing to risk the employment domino effect of having a company this integral to the national economy be liquidated.

    I didn’t believe for a minute that any of brainiacs on the Obama economic team hold out any serious hope that Chrysler will survive long term. What they’re shooting for is survival past the next election, at which point
    Chrysler’s dissolution will be just a blip in a (hopefully)vibrant and fully recovered economy. And if Marchionne somehow pulls off another miracle and revives the company, that’s gravy.

  4. @G

    Like a lot of people, you seem to think all 300,000 jobs just “go away” if Chrysler goes away.

    Not exactly. First of all, some other company definitely would have bought Jeep, and someone probably would have bought Dodge trucks (I mean, even Hummer found a buyer). And the Dodge truck is a great truck.

    Then, demand at Ford and GM would have gone up with Chrysler’s former car buyers migrating over there, which means more jobs at those places, as well as the Japanese auto manufacturing plants in the U.S., since some of those car buyers would end up there as well.

    Fiat, or somebody else like Renault, could have still done a deal to bring their vehicles in if they hooked up with GM or Ford, or if they ending up buying Jeep or Dodge trucks, and more jobs would be created that way as expanded that foothold into the U.S. No way they wouldn’t take over the manufacturing plants of whoever they bought here with the dollar-euro rate at 1-1.5 right now.

    It’s misleading to throw that whole number of 300,000 out there and and say that’s how many jobs will go away. Because it wouldn’t happen like that.

  5. John: maybe not all the jobs would have been lost, but most of that 300K would be gone. And the effect on the Great Lakes region would have been brutal. The effect in Michigan would have been devastating. As it is, Carpocalypse has already wreaked havoc in this state and in the broader region. And, as a Michigander, I am relieved that the decision was made to save Chrysler, even if but for a few years.

  6. RIGHT ON!!!

    You said it all. Thank you. I agree with you on both counts.

    I wish I could have gotten a vote on where my money went.

  7. G –

    The only “miracle” that can happen is that a few years from now Chrysler is sellng Jeeps, Dodge trucks and all their cars are on Fiat platforms.

    As the other commenter said, couldn’t we have accomplished the same thing by selling off the Jeep and the truck division to different buyers and used up far less taxpayer money? We would have had to spend some small amount of money to keep the truck line and the Jeep division running until a buyer could be found for each, but that would have been okay.

    And the Italians (or the French) could have either bought one of those lines or spent their own money to re-enter the North American market, if that’s what they wanted to do, although I think we would have had new CHinese owners of both Jeep and the Dodge truck line.

  8. Or we could have just provided only enough aid to keep Jeep alive as a new stand alone company and the same for Dodge trucks. That way the American taxpayer doesn’t have to subsizes those awful crappy Chrysler car, which cannot be saved no matter how money you throw at them.

    Just give up on the cars and start over.

  9. I think it’s pretty clear Rattner understood Chrysler was not worth saving based on objective business criteria, but that it was done anyway due to concerns with the overall economy and the political unpopularity of appearing to simply let jobs “die” (even though I think they are simply putting off the inevitable).

  10. I don’t want to guess at the author’s intention here, but I’m assuming he knows Rattner made the bet on Chrysler for the sake of jobs.

    My take is that he’s saying the bet on Chrysler wasn’t worth it, that knowing everything he knew about Chrysler at the time, he would have made a different decision than Rattner did. I don’t think there is a need to keep repeating why Rattner did what he did. I think that’s obvious to everyone.

    My take-away is that the writer is saying he would have given aid to GM and not to Chrysler knowing full well the consequences.

    Also, I agree with the other person commented that all the aid has done is delay the loss of jobs until later. Hopefully, “later” the economy can absorb the job losses better.

  11. Too bad Fiat can’t sell some of those surplus world-class Chrysler Sebrings over in Europe, huh?

  12. First time reader.

    This post is written well, and so are the other posts I’ve been reading. Congratulations to you for the quality I see here.

    Concerning this specific post, you make a convincing argument, but the dividend this loan pays for the lender, the American public, is employment in this terrible recession (maybe a Depression) and so I think the right decision was made.

  13. World class Sebring – that’s great.

  14. jeep would have a lot of buyers.

  15. Imagine how well Jeeps would sell if built by someone that actually understood quality, like Ford.

  16. Agreed and I mean with everything.

  17. Its just a delaying tactic. We should have taken our economic medicine up front, because the result cannot be made to go away, only delayed.

  18. Too bad those Chrysler workers couldn’t have been put to work building roads and bridges instead. Even if was just in the area local to a fomer plant, you could have gotten some infrastructure improvements for that money, as well as keeping people employed.

  19. GM and Chrysler – what a sorry pair.

  20. Stéphane Dumas,

    I know, I wasn’t being sarcastic. Ford could build better Jeeps than Crysler or AMC ever could. I had a Crysler built Jeep Cherokee, everything about that car was bad except for the 4.0 I-6 engine.

  21. And the goodness of that 4.0 liter straight six was handed down from Rambler, not Chrysler.

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