Fascinating article. I am especially fascinated by this: >> Rattner wrote in Fortune that Obama's advisers also "recognized the >> severe economic and political consequences of a Chrysler shutdown >> across broad swaths of the industrial Midwest." >> >> Opponents, led by Austan Goolsbee, a member of the Council of Economic >> Advisers, argued that Chrysler's collapse would have benefits: >> reducing excess capacity, strengthening GM and Ford, and shrinking the >> amount of government money needed to save GM. >> >> "As a University of Chicago laboratory experiment, (Goolsbee) may well >> have been right. But we were dealing with people's lives, not mice," >> Rattner told The News. "None of us were brave enough ... We just said >> to ourselves, 'That's 300,000 jobs in one day, when you have an >> alternative that's not stupid.' "
If you were are an advocate of an "Industrial Policy" ala Robert Reich in the 1980s, what would you think about the governmental decision-making? That is to say, how would you respond to critics who would argue that not only is the government institutionally incapable of identifying potential winners (relative to the market), but that even when the government is capable in an isolated case at the technocratic level to identify a potential winner and potential loser, the political incentives and motivations result in supporting the loser and not the winner? To be fair, the Swedes did make a decision quite different than the Americans (http://www.nytimes.com/2009/03/23/world/europe/23saab.html). If you are a radical and dismiss Industrial Policy as a liberal worthless compromsise intended to salvage the capitalist system, how is the decision-making going to be better in your "socialist democratic" system? How will the institutional structures be more likely to lead to allocating resources to the potential winners and not the potential losers relative to our present government decision-making? Or would you argue that the virtue of a social democratic system is precisely that it does support losers and not winners (as opposed to the heartless marketplace). David Shemano --- Original Message--- To: [email protected] From: c b <[email protected]> Sent: 10/21/2009 5:28AM Subject: [Pen-l] Auto task force almost let Chrysler fail, shocked at GM's poor management >> October 21, 2009 http://detnews.com/article/20091021/AUTO01/910210353 >> >> Inside the Chrysler, GM rescues >> >> Auto task force almost let Chrysler fail, shocked at GM's poor management >> >> DAVID SHEPARDSON >> Detroit News Washington Bureau >> >> The White House auto task force, "shocked" by the depth of the >> financial problems at General Motors and Chrysler, very nearly let >> Chrysler go under before President Barack Obama decided the economy >> couldn't afford to lose another 300,000 jobs. >> >> In a Detroit News interview and a first-person account published today >> in Fortune magazine, Obama's former top auto adviser, Steven Rattner, >> details his five months overseeing the automakers' bankruptcies and >> the decision to extend them a $62 billion federal bailout. >> >> Rattner paints a picture of "stunningly poor management" at both >> companies, saying in his Fortune piece that they were "in a state of >> denial." >> >> "We were shocked, even beyond our low expectations, by the poor state >> of both GM and Chrysler," he wrote. >> >> Rattner's interview with The News, and his Fortune essay, reveal for >> the first time why the administration ultimately decided to rescue >> Chrysler -- and how close it came to collapse. >> >> Chrysler and the United Auto Workers declined comment on Rattner's >> observations. >> >> GM didn't directly address Rattner's assessment. "Looking back doesn't >> help us with the important work we have in front of us," GM said. "We >> are grateful for the second chance our nation's support has given us, >> and we are confident we will succeed." >> >> Rattner tells a dramatic back story of Chrysler's near-death >> experience. Daimler AG, which bought Auburn Hills-based Chrysler in >> 1998, had "badly run" it, he wrote, as did its successor, Cerberus >> Capital Management LP. >> >> Rattner described Chrysler as "larded up with debt" and "hollowed out >> by years of mismanagement." It "never had a chance" under Cerberus. >> >> "The hardest decision we made was what to do about Chrysler," Rattner >> told The News. >> >> In mid-March, he recalled, key members of the auto task force met in >> the office of National Economic Council Director Larry Summers and >> split 4-4 on whether to save Chrysler. >> >> Rattner said the auto task force didn't want to keep Chrysler on life >> support if it was destined to die anyway. >> >> About 10 days later, on March 26, the auto team convened in the Oval >> Office to decide Chrysler's fate. "As we went back and forth over >> Chrysler, the president himself seemed as torn as (Summers) and I had >> been," Rattner wrote. >> >> In the end, Obama agreed to support additional government aid if >> Chrysler could tie up with Italy's Fiat SpA. He was convinced largely >> by the impact of job losses and the massive costs that would have >> resulted from a Chrysler liquidation -- up to 300,000 jobs, including >> suppliers, dealers and others. >> >> Rattner wrote in Fortune that Obama's advisers also "recognized the >> severe economic and political consequences of a Chrysler shutdown >> across broad swaths of the industrial Midwest." >> >> Opponents, led by Austan Goolsbee, a member of the Council of Economic >> Advisers, argued that Chrysler's collapse would have benefits: >> reducing excess capacity, strengthening GM and Ford, and shrinking the >> amount of government money needed to save GM. >> >> "As a University of Chicago laboratory experiment, (Goolsbee) may well >> have been right. But we were dealing with people's lives, not mice," >> Rattner told The News. "None of us were brave enough ... We just said >> to ourselves, 'That's 300,000 jobs in one day, when you have an >> alternative that's not stupid.' " >> >> Obama reached a decision during a second meeting that day with his >> economic team, Rattner recounted in Fortune. "I've decided. I'm >> prepared to support Chrysler if we can get the Fiat alliance done on >> terms that make sense to us," the president concluded. >> >> GM schism cited at RenCen >> >> At GM, members of the auto task force discovered an insulated cadre of >> executives, and "perhaps the weakest finance operation any of us had >> ever seen in a major company," Rattner wrote. >> >> GM sent the government PowerPoint presentations almost daily, seeking >> approval to spend $100 million. But the task force was "appalled by >> the absence of sound analysis to justify these expenditures," Rattner >> wrote. >> >> Senior GM executives worked on the top floor of Detroit's Renaissance >> Center, behind locked and guarded glass doors. The execs had special >> cards "that allowed them to descend to their private garage without >> stopping ... No mixing with the drones." >> >> GM Chairman and CEO Rick Wagoner set a tone at GM of "friendly arrogance." >> >> "Rick and his team seemed to believe that virtually all of their >> problems could be laid at the feet of some combination of the >> financial crisis, oil prices, the yen-dollar exchange rate and the >> UAW," Rattner wrote. >> >> It soon became clear to the task force that GM's management had to change. >> >> "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," wrote >> Rattner, a former Wall Street financier who has returned to private >> life. >> >> In mid-March, Wagoner offered to resign -- an offer he had also made >> to the Bush administration if necessary to win emergency loans. >> Rattner initially rejected the offer, but asked Wagoner to step aside >> March 27, before a regular board meeting. >> >> Wagoner, he wrote, was impassive, but then asked: "Are you going to >> fire (UAW President) Ron Gettelfinger, too?" >> >> "I'm not in charge of firing Ron Gettelfinger," Rattner replied. >> >> Wagoner declined to comment through a spokesman Tuesday. >> >> The GM board's reaction to Wagoner's firing was "violent, including >> veiled suggestions of mass resignations," according to Rattner. >> >> "The directors felt that one of their most important responsibilities >> -- hiring and firing the CEO -- had been usurped by the government >> without any warning or consultation," he wrote. >> >> GM's board wasn't up to the job, Rattner believed. >> >> "If ever a board of directors needed shuffling, it was GM's, which had >> been utterly docile in the face of mounting evidence of looming >> disaster." >> >> The government, which took a 61 percent equity stake in GM to forgive >> the bulk of its loans, replaced most of GM's board after it exited >> bankruptcy July 10. >> >> Rattner said Fritz Henderson, who was chief financial officer, was the >> only internal candidate considered to replace Wagoner. >> >> "We just didn't feel that at that moment, with everything going on, >> that we had the luxury of spending six months trying to find someone >> while restructuring the company, while it was in bankruptcy," Rattner >> told The News. Henderson showed "promise." >> >> GM dumped its Pontiac, Saturn and Hummer brands, and the task force >> suggested even deeper brand cuts, Rattner said. >> >> But Buick and GMC were "saved by Fritz Henderson's passionate belief >> in Buick's China appeal and GMC's reputation for ruggedness," he >> wrote. >> >> Looking back, Rattner said the task force was successful -- in part >> because it didn't need congressional approval. But the final verdict >> isn't in. >> >> "People are going to have to be patient." >> >> [email protected]">[email protected] (202) 662-8735 >> >> Additional Facts >> Rattner's words >> The following are excerpts from Steven Rattner's first-person account >> at Fortune.com of his five months overseeing the Obama >> administration's auto restructuring. >> >> >> 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. The cultural deficiencies were >> equally stunning. At GM's Renaissance Center headquarters, the top >> brass were sequestered on the uppermost floor, behind locked and >> guarded glass doors. Executives housed on that floor had elevator >> cards that allowed them to descend to their private garage without >> stopping at any of the intervening floors (no mixing with the drones). >> >> On Wagoner's firing: His face was impassive as I said, "In our last >> meeting, you very graciously offered to step aside if it would be >> helpful, and unfortunately, our conclusion is that it would be best if >> you did that." I told him of our intention to make Fritz acting CEO >> and he supported that idea, cautioning me against bringing in an >> outsider to run the company. "As we continued our rather awkward >> conversation, Rick suddenly asked, "Are you going to fire Ron >> Gettelfinger too?" Startled by the reference to the UAW head, I >> replied, "I'm not in charge of firing Ron Gettelfinger." >> >> Even before we met the two management teams, it was clear to us from >> the "viability plans" that the companies had submitted on Feb. 17 that >> GM and Chrysler were in a state of denial. Both companies needed >> gigantic reductions in their costs and liabilities. >> >> >> -------------------------------------------------------------------------------- >> © Copyright 2009 The Detroit News. All rights reserved. >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> >> _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
