Few events were as unpopular in the last year as the bailouts of General Motors and Chrysler. Poorly managed for the past decade (at least), the two companies problems have been hammered by uninspiring product lines, high gas prices, and the financial crisis that has flattened the rest of the economy. The Obama administration—caught between a rock (public resentment over bailouts) and a hard place (hundreds of thousands of workers would be out on the street if the firms failed)—decided early on to appoint a task force to steer GM and Chrysler toward calmer waters. The result was rapid bankruptcies for two enormous companies and a story that is sure to be rife with intrigue. And who better to hear it from than the former head of the task force?
Steven Rattner, head of the automotive task force until he stepped down last July, chronicles the whirlwind series of events in a story published at Fortune. An outsider to the car industry, Rattner lets more than a few cats out of the bag with his account of the process. “We were shocked, even beyond our low expectations, by the poor state of both GM and Chrysler,” he wrote.
Even though this is a tale of woe for both companies, GM takes the brunt of the beating in Rattner’s retelling.
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.
The cultural deficiencies were equally stunning. At GM’s Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).
The situation he describes at Chrysler was equally appalling. “Larded up with debt, hollowed out by years of mismanagement, Chrysler under Cerberus never had a chance,” he wrote. “We marveled, for example, that Chrysler did not have a single car that was recommended by Consumer Reports.”
Bankruptcy, Rattner said, was never the outright goal of the task force. But thanks to the demands of a handful of Chrysler’s lenders, it became their only option. Ironically, Chrysler’s bankruptcy paved the way for GM’s, setting the stage for rapid changes at both automakers.
The future of both companies is uncertain at best, but this insider account is a fascinating story of corporate restructuring at the extremes.