Former Task Force Chief Rattner Slams WagonerDavid Welch
Former Treasury Department auto task force chief Steve Rattner took off the gloves in his assessment of fired General Motors Chairman and CEO Rick Wagoner. In a speech at the National Press Club on Oct. 21 and in his own written account of the auto bailout, he said simply that Wagoner had to go. While that seems obvious given the company’s state when it first approached the feds about a loan about a year ago—not to mention its eventual descent into bankruptcy—in the Motor City Wagoner’s firing is still a subject of much debate.
Wagoner’s defenders will say that the government shouldn’t be firing executives and that, if not for the deep recession and credit crunch, Wagoner’s plan would have worked. GM’s cars were getting better and the 2007 labor agreement would have cut costs over time. His detractors say that he should have prepared GM for a recession sooner. The big loss in market share, some $80 billion in red ink and other missteps should have cleared the way for GM’s past board to fire him years ago.
But in reality, the government had no choice but to fire him. First off, many of the architects of the nation’s financial crisis remained in their chairs even after the banks received bailout cash. The public outcry was loud and justified. Given how little respect GM has among much of the American public, there’s no way the Obama Administration could have kept Wagoner at GM. It would look like the taxpayers are funding Detroit’s business as usual.
But that doesn’t answer the question of whether Wagoner deserved to go. He surely did. Rattner said in his own narrative of the auto bailout that he and his team found at GM “perhaps the weakest finance operation any of us had ever seen in a major company.” That should be the last thing they discovered at GM given that Wagoner and many of his very top reports came from GM’s New York treasury office or were, at the least, finance guys by training.
While Wagoner was CEO, the company’s market share fell from 28% to about 20%. He was never able to get the dealers and the union to see a new reality. That would have been incredibly tough for anyone in that job. But after nearly a decade, it was time to give someone else a shot.
There was something else that Rattner pointed out in his screed about Wagoner. He wrote: “Certainly 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.” Wagoner made that case repeatedly and many in the organization took it to heart. GM had excuses for not succeeding and they came right down from the top. Rattner also wrote that he found a tone of “friendly arrogance” from Wagoner. That was what did Wagoner in. He opposed the idea of bankruptcy, which the task force and its advisors thought was an option that needed to be seriously considered. And if Wagoner thought GM’s problems were inherited, and the union, oil prices and the yen were to blame, then he surely wasn’t the CEO to bring in real change.
All of those problems were his to manage. Some, like the fact that GM was ill prepared for a spike in fuel prices, were partly of his own making. Now its up to his successor, CEO Fritz Henderson, a man Wagoner groomed, to do what Wagoner could not accomplish.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.