Former Task Force Chief Rattner Slams Wagoner

Posted by: David Welch on October 22, 2009

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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.

Reader Comments

Ballbuster

October 23, 2009 4:20 AM

Incredibly, Rattner is surprised over GM's financial strait when everyone who kept abreast of GM's finances had knew about them years earlier. Rattner, a mediocre government gopher appointed to dig out a Government Motor, should stop exhuming Wagoner for public flogging. Like water over the dam, Wagoner has passed into the oblivion. Rather, Rattner should direct his criticism at the incumbents such as Fritz, Welburn, Lutz, and Dothery (sic) who are the clowns behind GM's collapse into bankruptcy. These clowns are still clueless as to how to design and produce cars that American consumers want to buy. Having shown their incompetence for well over a decade, neither of these clowns are about to spring a rabbit out of their costume nor pull GM out off its tailspin. If Rattner wants to show his insight, he should expose the phony leadership of these GM clowns.

Schmeltz

October 23, 2009 9:29 AM

I suggest that the firing of Wagoner was a vehicle to accomplish a couple of different objectives. First, it was a symbolic gesture of cleansing the company of a failed managerial culture. Rattner describes the GM executives being in their own insular little world on the top floor of the Ren. Center. That culture had to be shaken and toppled, and the most direct way to do that is to go for the top dog first.

Secondly, by removing Wagoner, this shows the Government, who is standing in as the financier of last resort, is in good conscience removing a person with an almost un-blemished record of failure. To have kept him on would have in a sense rewarded him for the extraordinary losses the company sustained under his watch.

Third, when bankruptcy was suggested, Wagoner didn't want to get out of the way. Rattner didn't have time for resistance like that.

Personally I think Rattner's handling of the whole firestorm was amazing. We'll be talking about this for years to come I'm sure.

Martin

October 23, 2009 10:22 AM

Ballbuster's comment on the other GM execs is questionable if not lacking in backup data. If you want to applaud Rattner for going after Wagoner, fine...go for it. But to suggest that Lutz and Wellburn can not build cars consumers want to buy is a rediculously uninformed and unresearched comment. To wit, since Lutz and Wellburn have combined to drive GM's product development they have only won car and truck of the year 5 times. And it is difficult to find a negative car review from the auto press on any of the recent GM vehicles which were all developed under Lutz and Wellburn. The truth is, that within the industry, designers know that GM is the hot design shop at the moment. Name me a GM loser in the last 3 years? CTS, no. Malibu, no. new Equinox, no. New srx, no. new lacrosse, no. enclave, no. Camaro, no. Silverado, no. And this last fact...even with the decreased market share, more Americans buy GM cars than any other automaker. Maybe you know something the rest of us don't...

Ballbuster

October 24, 2009 1:42 AM

Less than four years ago GM share prices started its death spiral from $70/share to zero. In the mid '60s GM commanded almost 75% share of domestic auto market. Today, it languishes at about 20% share. Through out its history except recent decades, GM was the technological and design leader. Today, GM is playing catch-up with European as well as Asian brands. If there is any need to provide backup-data for Ballbuster's assertion, it is the fact that the American consumer has voted down, with his cash, GM's product year after year on perceived as well as actual deficiencies. These deficiencies are the product of GM's inept managers. Like so many managers at GM, Lutz thinks he has special talent when his is nothing but a big ego. To wit: Lutz is the father of the fiasco Soltice/Sky, two poorly conceived and executed 2-seater now relegated to the out-house after wasting almost $1billion. Further backup data: the unbiased Consumer Report criticized the Soltice/Sky's rough and noisy engine and consequently did not recommend the twins. While many GM insider considered Lutz as the father of the Soltice/Sky, others on the outside consider Lutz as the real Mother..... of GM. If there were ever an award for an utterly ugly vehicle, that trophy would definitely go to Wellburn who found the Pontiac Aztek sufficiently graceful to justify several production years. It is Wellburn who adamantly believed GM's luxury car, the Cadillac, should have prismatic shapes rather than elegant curves championed by European luxury auto makers and imitated successfully by the Asian brands. After years of abuse such as "rebadging;" installing Chevy engine instead of Cadillac's; and burdened with stodgy hearse-like design, Cadillac brand under Wellburn stood for nothing. The result: casualty kept piling up at the Cadillac dealerships. More backup data: Within the last 10 years, Lexus and Infinite commanded greater market share than Cadillac while Mercedes has replaced Cadillac as the gold-standard for luxury cars in America. The Cadillac brand is debased so low that even the Koreans are coming by to deliver a few karate kick at Cadillac's groin. Rodney Dangerfield had more respect. It keeps getting better. Under Lutz and Wellburn, even the Chevy pickup truck, the bread-and-butter of GM, suffered. With poor quality control, unimpressive mpg and below reliability, the 5-cylinder Colorado was DOA, especially when the embolden Toyota builds the Tacoma in GM's backyard. Finally, what Ballbuster knows is that there are inept managers who harbor within GM's inner circle pretending to know much about the automobile business. Through denial or out-right misrepresentation, these clowns and their proxy will stop at nothing until GM, the icon of America's proud automobile industry, is destroyed. It is unfortunate that BW has provided a forum for these scoundrels to ply their propaganda.

Paul (Vw)

October 24, 2009 8:32 AM

Perhaps Wagoner's biggest sin was donating to the campaign of a presidential candidate other than Obama...

http://www.newsmeat.com/ceo_political_donations/

Was there every any journalistic investigation of the dealerships which were killed--were the owners predominately non-democrats?:

Arun Kumar

October 25, 2009 11:48 AM

Martin,
Ballbuster is correct in that Welburn and Lutz are great car guys, but do not have any clue about what is their strategy to build GM. We need people at the top to know how to rebuild GM, not only to build great cars because at the end of the day, consumers have to know what GM stands for: (1) GM cannot be all things to all people (like in the days of Sloan) (2) it has to strive to achieve something in this marketplace...quality, reliability, fuel efficiency, leader in electric vehicle.

Simply producing a one-off Volt will not get GM back into black, you need to have a product strategy, which I am not clear GM currently has. Producing great products without a clear strategy is like boxing with one hand tied behind your back.

I live in Detroit and look for revival of Detroit. Ford has shown it can do it, so it is now upto GM and Chrysler.

Thanks.

EX - REP

October 29, 2009 6:44 PM

As a ex - district manager for Chrysler, lets just say they were on a road to distruction for years. All we did as district managers were to force car dealers to take more inventory than they or the market could bare. Chrysler did not care what happened after wards as all they wanted to do was to make their big profit sharing checks. All we got in most cases was a 25.00 gift card and we had to FIGHT to get that.

miath

November 2, 2009 7:42 PM

why every body pin point gm ,,,,what about the banker,,,,,the car company invest big money on developments..the banker invest your money and keep the big profit,and your give more money to help the bank to fuck you again and the CEO still in is big office ,what your bank said if you did a bankrupt before.you ask for a lone,,no

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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