Steven Rattner: Why we had to get rid of GM's CEO

[pauldun170]

Steven Rattner: Why we had to get rid of GM's CEO
The man who led the auto bailout tells about his shock at the state of the carmaker's finances and management.
By Steven Rattner
Last Updated: October 21, 2009: 9:39 AM ET
(Fortune) -- Without any experience in automaking or government, Steven Rattner left his Wall Street perch to wade into the largest restructuring in American history. The scale and speed of the rescue raised many questions, inspiring Rattner to write this account of a defining moment in capitalism.

Rattner, who led the group that did the hands-on work, believes passionately that the decision to intervene represented not "creeping socialism," as some feared, but a critical part of the effort to prevent economic collapse. In an excerpt from this Fortune exclusive, Rattner gives a behind-the- scenes look at the ouster of GM's Rick Wagoner:

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).

In my relatively few interactions with chairman and CEO Rick Wagoner, I found him to be likable, dedicated, and generally knowledgeable. But Rick set a tone of "friendly arrogance" that seemed to permeate the organization.

Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW.

It seemed completely obvious to us that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue. Equally important, GM's February viability plan was more "business as usual" and not the aggressive new approach that we felt was essential.

In a mid-March meeting with Rick, I explored his feelings about his team and then tried to work the conversation around to himself. "I'm not planning to stay until I'm 65 but I think I've got at least a few years left in me," said Wagoner, 56. "But I told the last administration that if my leaving would be helpful to saving General Motors, I'm prepared to do it." He added that neither he nor his board thought that was a good idea.

I left my conversation with Rick at that. The next day, I met with Rick's deputy, Fritz Henderson. Another GM lifer (and son of a GM lifer), Fritz conveyed more energy and openness to change. The question for us was whether GM would be better off with Fritz or with an outsider, as Ford (F, Fortune 500) had done in bringing in Boeing executive Alan Mulally. While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil.

Meanwhile, if ever a board of directors needed shuffling, it was GM's, which had been utterly docile in the face of mounting evidence of looming disaster. We decided to recommend to Tim, Larry, and ultimately the President a package that would include replacing Rick with Fritz as interim CEO, changing at least half of the board, and making an outside director chairman (which should be universal).

Reporter associates: Marilyn Adamo and Scott Cendrowski


Read Steven Rattner's full account of the auto bailout

First Published: October 21, 2009: 3:54 AM ET







Find this article at:
http://money.cnn.com/2009/10/21/auto...tune/index.htm

[zer0t]

I saw this one on CNN Money--interesting stuff.

[Smittie61984]

Originally Posted by pauldun170

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).

Yeah. Because government officials never live a lavish lifestyle. I'm sure Rattner always intermingled with his "drones".

Fuck look at a city hall in some fucked up little suburban town in Georgai called Suwanee. Lavish doors, marble, etc with private parking garages for it's employees (It's the big building with the bell tower)...
http://maps.google.com/maps?f=q&sour...12,167.44,,0,5

No government official should ever have power over a company like that no matter how much money they loan them. If you got a loan for building a house and the bank came to you and said "We don't like who's building your hosue so fire him/her" you'd tell them to go fuck themselves.

[Kaneman]

Originally Posted by Smittie61984

No government official should ever have power over a company like that no matter how much money they loan them. If you got a loan for building a house and the bank came to you and said "We don't like who's building your hosue so fire him/her" you'd tell them to go fuck themselves.

Bad things happen when you sell your soul to the devil, even if its for survival. GM should've been allowed to go crashing into oblivion where it belongs.

[goof2]

Originally Posted by Kaneman

Bad things happen when you sell your soul to the devil, even if its for survival. GM should've been allowed to go crashing into oblivion where it belongs.

It does have a precedent. Carter signed legislation which guaranteed $1.5 billion in loans to Chrysler as one of the last acts of his presidency. The loans were paid back 3 years later. Of course, the government didn't try to run the company at the time either.

Part of their recovery strategy almost caused the company to go bankrupt later in the decade anyway. It turns out putting long bumper to bumper warranties on pieces of shit like the K-car and L-car just to move them out the door gets expensive when they start falling apart.

[Kaneman]

I worked for Chrysler/Mercedes for 10 years, its simply mind-boggling how inefficient they run ever single facet of their business, Chrysler especially. It is as if the culture demands retards be appointed to management.

[Smittie61984]

Originally Posted by Kaneman

Bad things happen when you sell your soul to the devil, even if its for survival. GM should've been allowed to go crashing into oblivion where it belongs.

I agree that GM should have gone down a long time ago. But what MBA Harvard educated businessman/woman is going to want to work for major corporation with shitloads of jobs dependent on him when some government bureaucrat can come in and fire you or slash your pay whenever they want? You might get the retarded kid off the fryolater if he happens to be drunk that day.

As shitty/awesome as that guy was it should have been up tot he people in the company wether he should stay or not. Not up to some governmetn hack who probably threatens to have the government come down on them because they LOANED them money which means they'll get it back (in theory) with interest.

[zer0t]

Smittie is right. No real talent will want to go to a firm that the gov can interfere with.

[Homeslice]

Everyone already knew that GM's management & organizational structure sucked, but it sounds like this Rattner guy is tooting his own horn.... like as if he knew shit about the auto business in the first place. How old is he, like 35? Lmao........Sorry but most banking industry people don't know shit about how to analyze a manufacturing business, other than the debt it holds.

[101lifts2]

GM is typical American buisness mojo. Look at the company you work for (private or government) and compare to just how fucked up it is against GM.

It's America folks...pure America.