Inside Obama's Auto Industry 'Overhaul'

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
Houghton Mifflin Harcourt
Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
By Steven Rattner
Hardcover, 320 pages
Houghton Mifflin Harcourt
List price: $27

Read An Excerpt

General Motors' former leadership was "appalling" and the company had no idea how much cash it had on hand, the Obama administration's former "car czar" says.

Steven Rattner is the Wall Streeter called on by President Obama to lead his auto task force in February 2009. Before resigning from the post in July of that year, Rattner led the team at the Treasury Department that kept GM and Chrysler alive. His new book, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry, provides a peek under the hood at what it took to save two of America's automotive giants.

GM Vs. Chrysler

The case for saving GM was much stronger than for saving Chrysler, as GM's prospects were better and its collapse would have been more devastating. The Obama administration was divided on whether Chrysler should be rescued. Rattner was among the advisers gathered in the office of Larry Summers, head of the National Economic Council, to prepare a recommendation for Obama on the Chrysler decision.

"It was at one point 4-3 against saving Chrysler," Rattner recalls, "and then after a lot of hemming and hawing on my part, I came to the view that at this moment in the economy, staring down into the black hole of potentially an economic abyss, was not the moment to let Chrysler go when it could be saved."

Firing The CEO Of GM

The task force, with the support of the White House, also called for the resignation of former GM CEO Rick Wagoner in March 2009. Rattner felt that new leadership was essential to seeing any results from the U.S. government's investment in GM.

"It seemed obvious to all of us that it's very hard to put that amount of new money behind a CEO who's not only driven the bus off the cliff, but doesn't even realize where the bottom of the cliff is and what has to be done to get back up to the top of the mesa, if you follow the analogy," Rattner tells NPR's Robert Siegel.

An 'Appalling' Culture

In a word, Rattner describes the culture of GM under former leadership as "appalling."

Author and former 'car czar' Steven Rattner i i

Author Steven Rattner led President Obama's auto task force, formed in February 2009 to save Chrysler and GM. A former New York Times reporter, Rattner left Wall Street to serve as "car czar" and resigned from the post in July 2009. Petra Liebetanz hide caption

itoggle caption Petra Liebetanz
Author and former 'car czar' Steven Rattner

Author Steven Rattner led President Obama's auto task force, formed in February 2009 to save Chrysler and GM. A former New York Times reporter, Rattner left Wall Street to serve as "car czar" and resigned from the post in July 2009.

Petra Liebetanz

"GM could not tell you on any given day within $500 million how much cash they had, and the result was they had to operate over $10 billion, sometimes $11 billion, of cash — far more than any other company of its same size or scale," Rattner says.

In his new book, Rattner writes, "The auto rescue succeeded in no small part because we did not have to deal with Congress," which had already appropriated funds for the auto bailout during the end of the Bush administration.

"If we had had to go to Congress, and had gone through the normal legislative process that we've all now witnessed with health care, with financial regulatory reform, I think it is almost without doubt that at least one of these automakers would have collapsed, run out of money, and shut their doors before Congress got around to figuring what to do about it," he says.

Sacrifices To Serve

As a former reporter for The New York Times, Rattner brings special experience to writing his account of the auto industry rescue in Overhaul.

It was his years as a successful financier, however, that caused complications in the vetting process for his post as car czar. Rattner says the $400,000 in legal costs he incurred to be appointed is an example of the sacrifices of leaving the private sector for the public arena. While he thinks the money he spent was an exception to the rule, he says the bar is still set too high for those in the private sector who wish to serve their country.

"They simply wouldn't do it, and I think, while there are great people in Treasury, great people in the White House, that's a really bad outcome for the country not to attract the best and the brightest, particularly when you have an economic and financial crisis of the sort that we were facing."

Excerpt: 'Overhaul'

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
Houghton Mifflin Harcourt
Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
By Steven Rattner
Hardcover, 320 pages
Houghton Mifflin Harcourt
List price: $27

PROLOGUE

THE OVAL OFFICE has no proper waiting room, only a small anteroom in which President Obama's "body person," Reggie Love, and his secretary, Katie Johnson, are usually seated. Against the wall is a small TV, normally used to monitor news channels. But on this Sunday evening near the end of March 2009, it was tuned to the Arnold Palmer Invitational golf tournament, where Tiger Woods (then still heroic) was making a long-awaited return from knee surgery.

A few minutes before 7:30 a handful of us from the President's auto industry task force had followed chief economic adviser Larry Summers down a narrow flight of red-carpeted stairs and along a short corridor to this room. We'd spent the past hour in the rabbit warren of offices on the second floor of the West Wing, reviewing once more the key documents for a nationally televised announcement President Obama was to make the next day, the seventieth of his presidency. For Obama, this would be among his first major public actions; for our little task force, it was the point of no return.

Since the task force's hasty formation in February, we had been meeting with General Motors and Chrysler, both of which were being fed intravenously with taxpayers' cash. Dozens of consultants, investment bankers, and other outside experts had presented their views, and the question of what the government should do with the struggling automakers had been debated extensively up the administration chain of command. Finally, in tense meetings at the White House a few days before, the President had made his decisions. Those decisions had remained secret until now; tonight he would call the Michigan lawmakers to alert them to what he was planning to say the next day.

The President hadn't come downstairs from his living quarters yet, giving us a few minutes to root for Tiger's comeback — for me, a welcome distraction from worrying about whether our plans for the largest government intervention in industrial America since World War II could work. We had had only five frenzied weeks to prepare for this moment. One more time I mentally reviewed those plans, which included additional billions in taxpayer funding for General Motors and Chrysler and several other controversial and risky measures. What could go wrong? I'd asked myself over and over. As a prime mixer of the strong medicine that the President was about to administer, I was sure that if disaster ensued, all eyes would be on me.

In particular, I worried about the much-discussed prospect of putting the automakers into "controlled bankruptcy," a radical approach that defied conventional wisdom. While the President's speech the next day would leave open the possibility that bankruptcies might be avoided, I knew that the mere mention of it — let alone actually taking the step — risked imploding the auto companies, crippling thousands of related businesses, vaporizing millions of jobs, and intensifying what was already a deep recession across the Midwest. With America in the midst of the worst financial crisis since the Great Depression, this was no hyperbole: the failure of the auto companies could endanger the economy in ways that were almost too frightening to contemplate.

The President arrived a few minutes late (Tiger was playing a particularly crucial hole), dressed in khakis and a black zippered jacket. I was not surprised that he was wearing casual clothes — I had on khakis myself. Since President Obama's arrival in the White House, shirtsleeves had become the Oval Office norm, and on weekends almost anything went — even T-shirts and jeans worn by unshaven, sockless men.

While his dress was informal, the President's mood was resolute. He had the air of a man in the business of calmly executing his decisions, not second-guessing them. After he'd chatted briefly with Reggie about the golf match, we followed him into the Oval Office, where he sat behind his desk, bare but for a folder of talking points for his calls.

Katie dialed him first into a conference line on which four lawmakers awaited: Michigan's two senators and two of its congressmen. Delegations from our task force had been meeting regularly with them — tense, often testy sessions in which we were lectured about the importance of helping this critical industry.

We clustered around a phone across the room from the President's desk, by the armchair in front of the fireplace where he sat during meetings. Katie had activated the phone's speaker so we would all be able to listen in, but it barely functioned — probably installed by a "well-connected government contractor," the President joked.

He worked through his talking points, fluidly detailing the next day's announcements. Then he paused to let the legislators speak. John Dingell, the longest-serving member of the House of Representatives in history, was gracious and statesmanlike. The others were audibly on edge, although considerably more polite and restrained in conversation with the President than they had been in their meetings with us.

Congressman Sander Levin seemed to interpret the President's allusions to bankruptcy for GM and Chrysler as just a negotiating tactic. "I understand that you have to refer to bankruptcy to get people to the table," he began.

The President interrupted in a measured tone: "I don't want you to leave with that impression. I'm telling you that because it's a real possibility."

At this, a chorus of anxious voices crackled through the speaker. Senator Debbie Stabenow urged that if the President was going to send such a tough message, he ought to couple it with a strong statement of support for the auto industry. Senator Levin beseeched him not to use a broad brush in criticizing the companies and to acknowledge the progress that they had made.

The President listened carefully. When he brought the call to a close after about thirty minutes, he asked Larry to take another look at the speech. By the following morning we'd responded by sanding down the criticism of the companies and adding the "Cash for Clunkers" program to bolster car sales.

The next call was to Governor Jennifer Granholm of Michigan. I'd gotten to know her as an energetic, dynamic candidate during her 2006 campaign, but Michigan was suffering the nation's highest unemployment rate, and in our more recent conversations she'd seemed beaten down and demoralized. Now, as she listened to the President outline his plans, her spirits seemed to fall further and her voice barely rose above a whisper.

"I hope you know what you're doing," she said softly.

During the final call, Ron Gettelfinger, head of the United Auto Workers, who had been defiant the previous autumn when Detroit first asked for federal help, was low-key and respectful now. This augured well for the tough discussions we knew we needed to have with him.

When his calls were completed, the President walked out of the Oval Office and back to the small TV, to learn that Tiger had hit a birdie putt on the eighteenth hole to win. Tiger's day may have ended, but for the task force, a night of work was just beginning.

Excerpted from Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry. Copyright 2010 by Steven Rattner. Excerpted by permission of Houghton Mifflin Harcourt.

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