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.
It’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.
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