In his new book, “Overhaul,” Steven Rattner, who led the government’s efforts to bring General Motors and Chrysler back from the brink of collapse, begins his story of the bailout with what he calls the auto task force’s “point of no return.” The month was March 2009, and President Obama was about to announce “the largest government intervention in industrial America since World War II.”
From there, Rattner, a former New York Times financial reporter who covered energy and the economy during the Carter administration before launching a career in finance, delivers a blow-by-blow, dollar-by-dollar account of restructuring the Detroit automakers. The amount that “the American taxpayer has staked on overhauling Detroit,” writes Rattner, is no less than $81.8 billion.
The scant mention of fuel economy and alternative propulsion vehicles offers a reminder that this was by no means a green overhaul. Yet peppered throughout the book are a handful of comments about wasteful stimulus awards, the “fad” of green jobs, and how he thinks GM’s Chevy Volt plug-in car will do nothing to turn GM’s fortunes around for years to come.
Here’s how Rattner weighs in on gas guzzlers, the Volt, greentech, and more:
The root of the problem: Rattner writes that “the struggles of GM and Chrysler were as much a failure of management as a consequence of globalization, oil prices, and organized labor.”
Crisis deferred: The auto industry “could have crumbled before the twenty-first century began had not a revolutionary development — the sport-utility vehicle — hit the streets,” Rattner writes. “Consumers were in love again, not with American cars exactly, but rather with American light-trucks-turned-passenger-vehicles.”
Technical difficulties: A 37th floor conference room at GM became the office for three auto task force members during their trips to Detroit, according to Rattner. When the trio asked about Internet service for the room, “they were told that the necessary approval process for visitors was too cumbersome to navigate.” A task force member named Harry Wilson, “couldn’t believe it,” writes Rattner. “He represented GM’s largest creditor and soon-to-be owner, yet the company wouldn’t or couldn’t connect him to the web so he could do his work. In the end, he and David [Markowitz] bought wireless cards with their own money.”
Sloppy stimulus: “In our well-intentioned effort to jump-start the economy, tens of billions of dollars in stimulus funds have been disbursed without anything like the rigor that private equity or venture capital investors apply. When the dust settles, we will be disappointed by how little lasting benefit we get for those dollars.”
Looming battery glut: Rattner notes that “energy has been a particular beneficiary of federal largess,” and advanced vehicle facilities, including battery plants took center stage during President Obama’s efforts to tout stimulus success stories this summer. Rattner views these projects with some foreboding, however. “[M]ixed in with the evidence of progress were telltale signs of waste,” he writes, citing a forecast from Total Battery Consulting’s Menahem Anderman that global demand for electric car batteries will amount to just one third of the production capacity for these batteries at stimulus-funded U.S. plants by 2014.
Dissing Chu: Rattner writes that during his first meeting with the cabinet-level Auto Task Force, “Nearly all the attendees understood this session was purely ceremonial, but a couple — such as Energy Secretary Steven Chu — weren’t yet versed in the ways of Washington and thought they were there to provide substantive input.”
The (limited) power of the Volt: “There is no scenario under which the Volt, estimable as it may be, will make any contribution to GM’s fortunes for many years,” writes Rattner. He goes on to warn against “irrational exuberance” for green jobs, which he dismisses as “the fad of the moment.”
What would Steve Jobs do?: Rattner got behind the wheel of a Volt prototype during a visit to GM’s Tech Center in Warren, Mich., in March 2009: The car “looked fine on the outside but had an interior that seemed like an Apple iPod knockoff,” he writes. But he found that the Volt “drove surprisingly well and accelerated far better than I’d expected. It was noiseless and smooth and did not noticeably shift gears.” Rattner describes the experience as “fun but irrelevant to GM’s near-term survival.”
Image courtesy of Houghton Mifflin Harcourt