Another Round With Rattner

In a way, I've been stalking Steve Rattner for months now. It is part of my effort to fully understand the federal bailout and subsequent restructuring of the auto industry. It has been an interesting pursuit.

Some people have called Rattner the “car czar” because of his role in the government coming to the rescue of teetering General Motors and Chrysler.

Rattner tries to respond graciously to that title. But he notes his great-great grandfather was a fur trader in Russia and would turn over in his grave at the thought of a descendant being called a czar of any kind.

I've read Rattner's book “Overhaul,” and attended his presentations, such as the one recently an International Motor Press gathering in New York. I've posed questions to him to further my understanding of a monumental event in U.S. automotive history.

Any undertaking of the size and magnitude of restructuring two major auto companies will have its critics. This one is no exception.

With any endeavor of this size, mistakes will be made. In my own view, shedding dealers so dramatically was a mistake. Dealers are the customers of the manufacturer. Shedding customers will not sell more vehicles.

The report provided by the Special Investigator of the Troubled Asset Relief Fund agreed and excoriated the federal task force headed by Rattner for enabling the dealer terminations.

When I asked Rattner about the wholesale dealer terminations, he said the task force tried to make sure all parties involved made sacrifices. But the panel regarded dealers collectively as a single constituency.

As the economy and business climate improve, GM and Chrysler will need additional dealers to maximize market share or will lose ground to competitors.

When asked why “car guys” weren't part of his Task Force, which was made up of people with no real interest in cars but plenty of real-world expertise in business restructuring, Rattner is ready with an answer.

He asked everyone to recall when three “car guys” — former GM CEO Rick Wagner, former Chrysler CEO Robert Nardelli and Ford CEO Alan Mullaly — went to Washington seeking a bailout.

Rattner noted they came by private jets, for which they were scolded by members of Congress.

The three claimed that for a mere $25 billion. The bailout ultimately was $82 billion, which is being repaid or redeemed rapidly. But it is obvious the “car guys” were in complete denial as to their financial condition, even Mulally who went to Washington more in support of the industry than for money. Ford, of course, ended up not taking federal assistance.

Why was Rick Wagoner removed? Rattner says Wagoner was steeped in GM corporate culture and was in complete denial about the condition of the company and the need for bankruptcy.

Not knowing how much his company would need to survive was really the straw that sealed his fate. The report GM filed after the Bush administration bridge loan was so deficient there really was no other choice for the task force other than to replace Wagoner.

Why was the UAW favored over other constituent group? Rattner says it is more a matter of perception than anything else.

First, world class car companies need skilled workers to build the vehicles. Bankers and bondholders can't build cars, he says.

In addition, he went through a list of concessions imposed on the UAW. The 320 job classifications previously in place are no more. There is no more “jobs bank,” where the Detroit 3 paid workers to not work.

Rattner engineered the restructuring and is clearly relishing the current tide of success of GM and Chrysler.

“Car guys” probably wouldn't have terminated dealers to the extent Rattner did. But would they have gotten anything else right?

Auto consultant and former dealership general manager Dave Ruggles is at [email protected].