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Chrysler 'never had a chance'

2009-10-22 10:09

Detroit - The Obama administration was deeply divided over whether to fund Chrysler's restructuring in bankruptcy and whether the automaker could survive to repay the investment, according to a former senior official.

Steve Rattner, the investment banker who headed the Obama administration's autos task force until July, also said he had been shocked by the "stunningly poor management" at both Chrysler and its larger rival General Motors.

"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," Rattner said in an account of of his stint in the administration, published by Fortune Magazine on Wednesday.

"Years of mismanagement"

Rattner said the decision to offer Chrysler $12 billion in emergency financing to restructure under the management control of Fiat SpA had been "a close call," adding that the administration was ultimately swayed by the view that allowing the automaker to liquidate would cost 300 000 jobs.

"The group was torn," Rattner said, noting that at one point key members of the autos task force had been split 4-to-4 on whether to offer Chrysler financing.

Rattner said when pressed by White House economic adviser Larry Summers, he had estimated the odds of Chrysler surviving for two years at 51%.

He said the automaker under former owner Cerberus Capital Management "never had a chance" because of its high debt and "years of mismanagement."

Bolster GM's chances of survival

White House economic aide Austan Goolsbee, meanwhile, had "led the charge against Chrysler," arguing that allowing the automaker to fail could bolster GM's chances of success.

The revelations from Rattner on the closed-door deliberations on the autos bailouts come at a time when GM is struggling to win back American consumers and Fiat chief executive Sergio Marchionne is readying a five-year turnaround plan for Chrysler.

Rattner forced the resignation of former GM Chief Executive Rick Wagoner and provided a first-hand account of his March ouster in his article.

Rattner said he found Wagoner "to be likable, dedicated and generally knowledgeable," but he also said the former GM CEO had "set a tone of friendly arrogance that seemed to permeate the organization."

"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," he said.

Rattner said the automaker's current chief executive, Fritz Henderson, had been "enthusiastic" about his promotion and had asked not to be tagged as an "interim" choice.

No comment

Wagoner, he said, also supported the selection of Henderson as his successor and questioned at one point whether Rattner also intended to fire United Auto Workers president Ron Gettelfinger, a political ally of the Obama administration.

Rattner said Wagoner had also cautioned him against hiring an outsider at GM to replace him, citing the example of Ford Motor Co.

"'Alan Mulally called me with questions every day for two weeks after he got to Ford,'" Rattner quoted Wagoner as saying.

Wagoner, who retired in August with a package worth $8.6 million, has not commented on the meeting with Rattner or his ouster.


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