Steve Rattner's new book “Overhaul” is must reading for anyone interested in the previously unknown details on how the auto industry bailout actually took place.
I approached the book with a mixture of curiosity and skepticism due to my personal feelings about certain imperfections in the auto industry bailout, in particular the dealer terminations. Rattner helped oversee those as head of the federal government's automotive task force.
The book did nothing to mitigate my anger over the dealer terminations. But I came away from the reading with a new found respect not only for the width and depth of the challenges faced by the Obama Admin.'s task force, known as Team Auto, but a real appreciation for what they did for the country.
It also reinforced the importance to the nation of the Troubled Asset Relief Program, an idea proposed by the Bush Admin.'s Treasury Secretary Hank Paulson and passed by Congress. Without TARP, it is unlikely the auto industry bailout would have been possible. Some unlikely heroes came to light, including President George W. Bush, Paulson, and even Vice President Dick Cheney.
During the last days of the Bush Admin., some Republican Senators were holding up a bill to bail out the U.S. auto industry. Cheney reportedly told them, “Don't let this happen on our watch unless you want to be known as the party of Herbert Hoover forever.” The book is a chronicle of deadlines, heated and impassioned debate, personalities, “brinkmanship,” and harsh negotiations.
There was serious debate among the Obama Admin. about just letting Chrysler go, as in the long run it was thought it was a lost cause and that letting it liquidate would help GM and Ford.
It also became evident that letting Chrysler go would send a ripple throughout the supplier community causing a “run on the trade by suppliers refusing to supply parts if not paid in advance. Called out in the book as incompetents, lightweights or obstructionists are such well known figures as Federal Deposit Insurance Corp. Chairman Sheila Bair and former auto executives including General Motor Chief Financial Officer Ray Young, and two former GM CEOs, Rick Wagoner and Fritz Henderson. There are many unsung heroes who labored in near obscurity. Of particular significance are three task-force members: Harry Wilson, a corporate restructuring specialist; Matt Feldman, driver of the strategy that allowed for the speedy trips through bankruptcy court; and Brian Deese, Team Auto's White House liaison.
It was Wilson who first proposed that taxpayers take an equity stake on GM to a large degree, and Chrysler to a lesser degree, to minimize the problem of sending them out into the marketplace with a huge load of debt, and the debt service that goes with it.
Rattner doesn't spend a lot of time on the dealer termination issue other than to emphasize that all industry experts he spoke to recommended thinning out the dealer body.
I suspect the primary industry expert was Steve Girsky, a one-time advisor to the United Auto Worker, who was disqualified for Team Auto membership by virtue of that relationship.
Girksy has been an outspoken advocate of much fewer, but larger dealerships.
Today, Chrysler is doing better than anyone anticipated. It and GM are exceeding conservative projections assigned to them. There are still issues at GM as evidenced by another CEO change as GM board member Dan Ackerson recently took over after Ed Whitacre abruptly “retired.“
Rattner chronicles the ongoing conflict between the old and new GM board members. There are many players who will be unhappy with his revelations, which is a good reason to read it.
He must have kept writing new chapters as things have unfolded, all the way up to publication. There are chapters yet to be written. But any student of politics, economics or the auto business should read this book.
David Ruggles is an automotive consultant and foremer dealership general manager. He can be reached at [email protected].