11. EPIC BANKRUPTCY

"THIS TIMELINE is impossibly aggressive. It's never been done before," Harvey Miller, the seventy-six-year-old senior statesman of bankruptcy attorneys, told Harry Wilson.

"Well, we don't have a choice," Harry countered, thinking of the President's deadline. "We can get it all done."

At 9 A.M. on the day after President Obama announced that we had put Chrysler into bankruptcy, more than three dozen well-dressed lawyers, bankers, and GM officials gathered in a conference room on the fifteenth floor of the General Motors building in New York. Dozens more had dialed in by speakerphone.

For the men and women present who had made bankruptcy their careers, General Motors was shaping up as the Big Show, the most massive industrial bankruptcy in history. The filing deadline was June 1, just a month away, and even veterans like Miller were intimidated. Privately, he had approached Matt and Harry a few days before with his concerns that GM's management was still in denial about the prospects of a bankruptcy filing and wasn't working hard enough to prepare.

Harry, chronically sleep-deprived, had a fierce adrenaline rush from the pressure. GM sought to open the meeting with a 150-page document. "What's this?" Harry asked. "The agenda," came back the reply. Harry, almost laughing, said, "You can't run a meeting with a 150-page agenda!" and moved on to the list that he and Matt had compiled.

He had before him an eight-page spreadsheet of several dozen topics that needed to be addressed in the bankruptcy—everything from GM's more than 500,000 supplier contracts to its relations with sovereign governments around the world. He had assigned responsibility for each item to individuals from the government group and GM. Next to those names, he had columns for next steps, deliverables, and due dates. In deference to GM, Harry started the meeting by framing bankruptcy as the fallback plan—GM officially still held out hope that it would find enough takers for its bond exchange offer to avoid Chapter 11. But no one else in the room saw that as a serious possibility, and by this point, privately, neither did Fritz nor most other top GMers. Then Harry dove in and began working through the list, item by item, to be sure everyone knew what would be expected.

Next to him was Matt Feldman, our stalwart bankruptcy sage. Minutes after the Chrysler petition was filed the previous day, Harry had gone to him and said, "Feldman, now you're mine." Though exhausted, Matt had dragged himself to New York for this all-day meeting.

The bankruptcy plan Matt envisioned for GM was an outsize version of the one he'd designed for Chrysler. With the help of many billions of taxpayer dollars, GM would separate its assets into two companies. "Old GM" would retain the factories, equipment, brands, and real estate that the business no longer needed. Its sole purpose would be to dispose of these assets, using the proceeds to repay the creditors that the other company, Shiny New GM, had left behind. The new company would own all the assets GM did want to keep. Free of crippling costs and debts, this new business would go forth as a streamlined, revitalized competitor on the world automotive scene. We meant it to be not only viable but also highly profitable.

The meeting ended at 6 P.M., having stretched nine hours. Even though it was Friday night, Harry didn't stop; he had booked a session with Carl Icahn, the legendary corporate raider and multibillionaire, who had lately expressed interest in acquiring a stake in Delphi. Icahn's offices were a couple of elevator rides away, on the forty-seventh floor. Matt dutifully accompanied Harry on the short journey, but was soon called back to Connecticut over a family matter. He was not sorry.

Harry, who liked to have an aide-de-camp by his side, summoned Sadiq Malik to Icahn's office as soon as Matt left. The meeting, while not producing any meaningful progress, lasted until after midnight, nearly killing the young analyst, who was too scared of Harry to take a bathroom break.

***

Neither Ron Bloom nor I attended that kickoff meeting in New York. My modus operandi has always been to delegate to younger colleagues whatever they can handle, and I felt comfortable with Harry's ability to manage the situation. Ron, however, having ushered Chrysler toward resolution, was eager to turn to GM. This marked the start of the only serious interpersonal conflict at Team Auto. Although Harry and Ron certainly had ideological differences, the friction between them was more a matter of style than substance. Both were take-charge guys. Harry saw GM as his baby; Ron, seventeen years older and officially the auto task force's deputy, viewed himself as senior to Harry.

The tension flared in Washington the next week. Ron went to Harry and said, "Let's sit down and divide up how the GM work is going to get done."

"Why do we need to divide it up?" Harry asked. "It seems to be working fine."

"Well, you've got some expertise, I've got some expertise, why don't we sit down and talk about it?" They walked down the long basement hallway to the Treasury cafeteria to chat.

"If you think I'm doing something wrong or something's not working well, let's talk about that," Harry said as they found a table. "But if all you want to do is take ownership of a process that's going really well, I don't think that makes any sense."

Ron repeated his thought about different skills.

"Tell me what your different skills are," Harry countered.

"I've done this before."

"I've done this a lot before as well. But if you think I am doing anything wrong, I'd be happy to address it."

Harry was not the only Team Auto member to feel some discomfort about Ron. After working shoulder to shoulder with him on Chrysler, Matt considered him too often dictatorial. Harry, having watched that interaction, was concerned that the same difficult dynamic could develop with GM. He also had a strong view that deal terms worked best when there was a clear leader with accountability. Nonetheless, Harry recognized that there was an enormous amount of work to do on GM and indicated that he was open to carving off pieces of the project. They agreed that Ron would spearhead our dealmaking abroad, particularly with the governments of Canada and Germany.

But when Ron said he also wanted to take over the talks with representatives of GM's major bondholders, the conversation got hot.

"Frankly, Ron, I think I've done more bondholder negotiations than you have," Harry was saying. "But also, I have to say, these guys don't like you."

"What do you mean?"

"They think you totally sold out to the unions. They don't trust you. They don't think you can be an honest broker. Whether that's true or not, that's what they think." This set Ron back. He reflected for a minute, concluding that he did not want to risk putting his ego ahead of the salvation of GM. "Okay. Let's set that aside and talk about the UAW."

Harry welcomed Ron's involvement on that front. He believed, as we all did, that Ron's knowledge of labor issues and his credibility with Gettelfinger were invaluable. But Harry insisted on playing an equal role. As long as Ron didn't treat him as a subordinate, he said, they could team up on the UAW talks.

The confrontation seemed to settle the differences between Harry and Ron, but after returning to our work area, Harry quietly issued orders that every GM-related e-mail to Ron must also be copied to him to make sure he stayed in the loop.

As Harry and his team crunched numbers for GM's financial restructuring over the next few days, they discovered a large flaw in our plan. In overhauling Chrysler, we had "invested" the $8 billion of new taxpayer money almost entirely as debt on the new company's balance sheet. We'd assumed we would do the same with GM. But GM, they realized, was going to require far more new money than Chrysler, even allowing for the automakers' difference in size. Harry's preliminary estimates showed that Shiny New GM would need at least $30 billion, on top of the $15.4 billion the Treasury had already put in. Yet that much new debt would leave the company groaning under a potentially unmanageable load of fixed liabilities—much like old GM. Harry couldn't find a way out of this.

After wrestling with the problem, Harry bounded into my office one morning waving a sheaf of papers. "We've been thinking about this the wrong way," he said. "We've got to equitize most of our debt." I immediately understood the Wall Street shorthand: he was proposing that instead of lending most of the money to GM as we had done with Chrysler, we infuse the bulk of our money into GM by buying stock. This would mean that the government would own General Motors.

I bought the logic of what he was saying. Leverage can be a good thing—I had made my living for nearly a decade in leveraged buyouts, and the businesses we'd worked with had almost all thrived. But debt can be particularly risky for companies in cyclical, capital-intensive industries like automobiles. A streamlined, relatively debt-free GM would have the flexibility and financial cushion to succeed. Yet I was also painfully conscious of a promise I'd made early on to Larry: "Don't worry. We're not going to end up owning GM." If Harry's analysis checked out, the question would be how to sell this turnabout to Larry.

This would bring us into one of the hottest controversies of the financial crisis. Nationalization had been in and out of the headlines since autumn, when the Bush administration had seized majority ownership of AIG. It turned the failed insurer into a joint operation of the Treasury and the Fed; nominally the company had a board of directors and CEO, but Hank Paulson and Ben Bernanke oversaw all the important decisions.

In February, as the economy and the stock market continued to slide, calls for outright nationalization of banks had increased. The calls came from a motley assortment of sages. Not surprisingly, leftish economists like Paul Krugman and Joseph Stiglitz were heard from frequently and loudly. But former Fed chairman Alan Greenspan, a lifelong champion of laissez-faire, weighed in, telling the Financial Times, "It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring." Spicing the mix was a band of hedge fund and vulture investors, who argued that based on any fair valuing of assets, many major banks were insolvent and should be taken over, just as the FDIC had done in many, much smaller circumstances over the years.

Tim and his Treasury team strenuously resisted. As repugnant as it was to leave troubled banks in the hands of those who had brought them to the edge of the precipice, Tim fervently believed that his plan for stress tests of the nineteen big banks, capital infusions, and other programs to remove troubled assets from their balance sheets was the safest way to restore the banks to financial soundness without risking panic in the markets.

But the pressure on the administration to do something more—anything more—was intense. Members of the President's inner White House circle, none of them banking experts, had relationships with many Obama supporters and donors who purported to have that expertise. With the stock market in seeming free fall, they barraged the White House with calls, e-mails, and memos.

On Sunday, March 15, President Obama had gathered his closest advisers, his economic team, and his banking experts in the Roosevelt Room to try to thrash out what to do when the stress test results landed and what else, if anything, to add to the medicine being administered. The discussion on that damp, chilly afternoon was heated; after a few hours, the President went upstairs to take a dinner break with his family, imploring his advisers to try to come to a consensus.

The group veered close to having the government take control of the two most troubled banks, Bank of America and Citigroup, which was already partially owned by the government by virtue of past rescue efforts. If the stress test results were unfavorable, the more aggressive attendees argued, the government's capital should come at a high price in terms of ownership and potential control. Larry Summers was tempted by the idea. As an academic, he well understood the intellectual argument that a bank with more liabilities than assets was an insolvent bank.

Taking over a couple of banks would not, in itself, necessarily be a disaster, as the AIG experience had demonstrated. What was unnerving about the March 15 discussion was that some advocated, as part of this proposed takeover, not making all the creditors of the two banks whole. Of course, just as we had done with Chrysler and were planning to do with GM, not giving all the creditors of an insolvent institution 100 cents on the dollar is fundamental to the bankruptcy process. But among the differences between banks and car companies is that the banks' creditors included counterparties to trillions of dollars of various derivative and swap transactions. The collapse of Lehman Brothers had nearly brought down the financial system when traders became terrified of being counterparties with anyone. Seeing creditors get more than they deserved was distasteful, to be sure, but compromising the counterparties of Citi and B of A would surely have had even more cataclysmic results. Fortunately, cooler heads prevailed, and when the Sunday meeting ended, seven hours after it began, Tim's plan remained intact.

Harry and I agreed on a strategy for making our case for government ownership of GM. We were not going to argue policy or politics with Larry; we were going to argue business. By the time we sat down with him on May 11 to talk about how to invest the public's money, I'd boiled down the message to something simple: "We can either get nothing for something, or we can get something for something." By that I meant that if we didn't take equity for our money, we would be shortchanging ourselves, since GM could not support more debt.

Harry was passionate. And after many years as an investment banker, I thought I was a pretty good salesman too. We started by explaining to Larry that foreign automakers, particularly the Japanese, operated with far less debt than GM would have even if he accepted what we were about to propose. Then Harry presented two contrasting scenarios. The first provided for the new Treasury money to be invested entirely as debt. Not surprisingly, even as far out as 2014, GM would be much more highly leveraged than its rivals—basically wrapped in a financial straitjacket. Any significant hiccup in the economy had the potential to send that GM spiraling into oblivion. The second scenario assumed that most of our money would go in as equity. A small portion would go in as debt, which would be fully paid off by 2014.

"This GM can compete and win," Harry said. Having spent the past month overseeing the rebuilding the automaker's plans from bottom to top, he was certain of GM's promise. He spoke of the potential for huge value, possibly recouping the entire investment, or more, by the government if it held GM shares.

Next came the most difficult aspect of our pitch. The way the math worked, Harry explained, the government would end up owning not merely a piece of GM's equity, but a majority stake of about 60 percent; in other words, it would control the world's second-largest automaker. Furthermore, said Harry, we thought GM should be set up as a privately held company. It would have only two other initial shareholders, the Canadian government and the UAW's VEBA, with a slice of equity reserved for the old GM bondholders. Not having GM shares trade publicly would have a side benefit: it would insulate GM from the constant pressures and attention of the stock market until it regained its footing. This could be private-equity-style investing at its best—a focused, efficient company with no public shareholders to distract it from completing its turnaround.

I could see Larry recoil. Any kind of government ownership was bad enough, but owning a majority interest was worse. And by making GM privately held, we would be delaying the government's ability to cash in its shares, because the automaker would first have to do an initial public offering. To make matters still worse, Larry sensed, correctly, that Harry's ambitions extended beyond just restructuring GM; with his boundless self-confidence, Harry wanted to make sure that the plan for Shiny New GM was executed perfectly. If that happened, the GM team's numbers showed that the equity of General Motors could be hugely valuable.

Larry was wary of jumping to conclusions. His comfort in our ability to restructure the companies was not matched by a similar confidence in our ability to manage them. And while Larry had his own doubts that markets were always efficient, he found it hard to believe that the value of GM's equity could really grow at more than 40 percent a year for the next five years, as Harry was predicting. "If this equity was so valuable, there would be a line of people down Pennsylvania Avenue waiting to buy it," Larry argued. In fact, no one seemed interested in GM equity, at any price. While I didn't necessarily feel all of Harry's optimism, neither did I believe that markets are always efficient. If that were true, there would be no Warren Buffetts, no investors who clearly delivered superior returns over a long period of time.

Once again, I felt pulled in opposite directions. I shared Larry's concern about government involvement in the private sector and recognized the Pandora's box aspects of what Harry was proposing. And I, too, had trouble believing that an investment in GM would appreciate anywhere near as much as Harry claimed. On the other hand, all of us on Team Auto wanted to give the company the best possible chance to succeed. Having Harry let go of GM the moment it exited bankruptcy, followed by a fire sale of the government's stake, didn't seem very sensible.

Larry soon bowed to one argument: there was no reasonable alternative to government ownership of GM. (So desperate were we to avoid government ownership that we half-seriously considered a proposal by Gene Sperling to give the GM shares to America's public libraries.) But Larry was unyielding on our second assertion—and, in retrospect, rightly so. He was determined to have the government's involvement be as short and nonintrusive as possible. Coincidentally, as the date to receive the results of the stress tests on the banks approached, Larry had launched a project known as the "USG as Shareholder." Anticipating the possibility that the stress tests would reveal the need for large capital infusions into the banks that could be provided only from TARP, Larry had asked Diana Farrell to lead an effort to establish rules for how the government would manage these potential investments. She assembled some of the administration's best policymakers, ranging from Gene Sperling to Herb Allison, the former Wall Street CEO who had come on board to run TARP. Now that the possibility of owning GM suddenly seemed imminent, Diana asked me to join.

Having directed the McKinsey Global Institute think tank, Diana was in her element. She knew the issues intimately, and her collegial manner fostered a thorough, efficient policy process. We deliberated four or five times, meeting in whichever space happened to be available in the crowded West Wing. At one point, to my surprise, I saw on my calendar that our next meeting would be in the Situation Room, the legendary White House command post established by John F. Kennedy after the failed Bay of Pigs invasion. We descended to the basement, making our way through a warren of twisting halls and small offices. The command complex was said to occupy a basketball-court-sized five thousand square feet, but the Situation Room itself was cramped and bunkerlike, barely big enough for a long polished wooden table, which seated fourteen and was flanked by extra rows of chairs. The ceiling was low and the walls were lined with display panels and communications gear, all switched off while we were there. Beyond an open door to one side, I could see military technicians huddled over screens in a darkened room, monitoring who knows what.

As Diana's work proceeded, the results of the stress tests arrived, revealing, as the Treasury and the Fed had expected, a need for large infusions of capital, although less than what had been expected. Meanwhile, the markets had improved sufficiently that almost all the banks were able to raise the cash they needed from investors, allowing them to avoid the dread grasping tentacles of TARP. But we knew that for GM, Chrysler, and GMAC there was no escaping TARP, so much of the work of the "USG as Shareholder" group ended up being applied to Team Auto's companies.

Still determined to limit the government's involvement as much as possible, Larry kept a close eye on the group's work. Tim also joined the meeting in the Situation Room and seemed to share Larry's concerns. As it emerged, the policy envisioned government ownership as a three-phase process. In the first, brief phase we'd be very active, setting business goals and guidelines and picking executives and directors. Once this rebooting was done, we would step back and let the board and management run the company. Finally, we would sell our stake "as soon as practicable" to recoup the taxpayers' money. (I had bargained for the word "practicable" in lieu of the more felicitous "possible" because I thought it connoted less of a rush for the exit.)

Choosing leaders to transform GM's culture was at the top of my long list of tasks. We had already made a major bet on Fritz Henderson, who had been the only responsible choice available to us in March. I very much wanted him to succeed. Yet while I had acquiesced in his request to have "interim" removed from his title, as the weeks passed I concluded that his chances were no better than 50–50. I was determined to bolster Fritz with a strong board and, particularly, a strong chairman.

Kent Kresa, the interim chairman, had been gracious in accepting the job under the difficult circumstances of Wagoner's dismissal. He was dedicated and energetic, but at seventy-one he was only one year away from GM's mandatory retirement age for directors. Moreover, after more than five years on the board, I doubted that he was enough of a change agent for GM. This was why I had asked him to serve only for a couple of weeks as I continued to look for a longer-term chair.

Once President Obama made his March 30 announcements, there was no longer any need to keep the search secret. I stepped up my calls, drawing often for advice from Welch and from Tom Neff, the dean of executive recruiters, whom GM had retained. Nevertheless, it was not an easy task. All of the other obstacles I had encountered in March remained, particularly the scarcity of distinguished former CEOs who were still young enough to serve for at least five years. Of the long list of people that we reviewed, Ed Whitacre stood out.

I had met Ed once or twice in my work as an investment banker in media and telecommunications, but I knew him better by reputation. Our backgrounds could not have been more different. Ed had been raised in Ennis, Texas, the son of a railroad engineer and union member. He grew up playing baseball and football and hunting, pastimes that never appealed to me. He'd been the first in his family to attend college, studying engineering at Texas Tech. Along the way, he got a summer job at Southwestern Bell that involved hammering in fence posts and measuring telephone wire, and after graduation he signed on full time. His record at the company was extraordinary, leading Southwestern's transformation from a backwater regional player into today's AT&T through a balanced mix of strong management and strategic vision.

His reputation was for toughness. I remembered having once read a Business Week story that described him killing rattlesnakes on his Texas ranch (he would pin down the snake with a stick and crush its head with a rock). His flinty image was reinforced by his lean, six-foot-four frame, his full head of gray hair, and his laconic speech. Ed believed that we are born with two ears and one mouth and we should use them in roughly that proportion.

When I reached Ed, he had no idea why I was calling or even that I was serving in the government. As far as he knew, I was still in New York doing media and telecom deals. My proposition startled him. His first reaction was not encouraging: "I am happily retired and I don't know anything about cars." But I thought I heard a hint of uncertainty in his voice and persisted in a follow-up call a day or so later.

As an investment banker, I spent many years comfortably peddling my products and trying to recruit talent to our firm. That was business. In my new role, I felt passion and tried to convey it. "This company needs to be saved," I said. "This country needs this company. We've got a mess on our hands and you can help."

For the second time, he replied, "I don't know anything about cars and I don't think I'm qualified to do this." Yet even more than in our first conversation, I sensed a chink in his armor.

Ed was headed to Singapore for an ExxonMobil board meeting, but we agreed to talk when he returned. I was twitching with excitement about the possibility of reeling him in. In our phone conversations he had lived up to my impression of his directness and clarity of thought and so I waited anxiously for his return. Harry was just as anxious. He viewed GM as his baby and saw fixing the culture as being just as important as fixing the brands or the UAW contract or the manufacturing footprint. He lobbied me relentlessly in his soft, determined way with ideas for remaking the board.

I shared his views but didn't want us to get ahead of ourselves. First we needed a chairman. When Ed returned from Singapore, I could tell that he had mulled over my offer and concluded that he was open to it. This was typical Ed; he didn't need a lot of talk or meetings to make up his mind. On my next call, he asked point-blank what would be the government's role in the company, making clear that his interest was dependent on GM being run without interference from Washington. I assured him that the Obama administration was committed to that. After a few more conversations, he confirmed that he would be willing to serve. I was ecstatic.

Now I needed to get the interim chairman on board. The challenge, however, was that Kent Kresa was loving his role and wanted to stay until his mandatory retirement in 2010. I called Ed to see if he'd consider joining as vice chairman for a year and then succeeding Kent. But Ed held his ground. "I'm sixty-seven," he said. "I don't have that many more years in me."

I'd dealt with tricky personnel questions over the years but never with such high stakes. I consulted Larry, who was still unnerved by how swiftly I'd dismissed Wagoner and by the strong media backlash. "Let's avoid another public execution," he said, urging me to find a graceful and invisible way to ease Kresa out. Left to his own devices, Larry probably would have stuck with Kent for another year. But I agreed with Harry. With the future of General Motors on the line, I didn't want the fear of a messy transition to become the enemy of the perfect.

Larry urged me to ask Jack Welch's advice. So I called Jack, and after hearing me out about Kresa, he said, "This isn't something you can do over the phone or even in a meeting. Take him out for dinner, have a couple of bottles of wine, talk to him about his life and his family. Then see if you can make this his idea."

As it happened, Kent, who lived in Los Angeles, was scheduled to be in Danbury, Connecticut, for a board meeting a few days later. I was sure Jack would commend me for offering to go to Kent rather than asking him to come to Washington. I made a reservation at a quiet restaurant I knew (as it happened, I had a house in the area) and flew up to meet him.

We had our wine. We talked about our families. Kent commented on how pleasant the dinner was. Then he pulled a list from his jacket pocket and talked enthusiastically about people he hoped to recruit for the GM board. I felt like a fiancé about to tell his bride that the wedding was off. Kent was such a dedicated, nice guy. I gently explained the problem: I didn't want to lose Whitacre, and in any event, changing chairmen just one year after bankruptcy seemed wrong to me. But Kent brushed away my concerns. He left saying how much he had enjoyed our evening and how much he looked forward to working together.

My effort to apply Jack's formula had been utterly unsuccessful. Now what was I going to do? Still mindful of Larry's admonitions, I decided to bring Ed and Kent together to see if they could work it out on their own, and orchestrated a meeting in Washington. When the two arrived at Treasury at 5 P.M. the following Wednesday, I escorted them to the Map Room (a conference room whose clutter undercut the grand name) and left them to talk. An hour later, I returned to find that neither had given an inch.

I felt there was no longer any choice. My determination to get the right result outweighed my fear of public controversy or Larry's wrath. I asked Ed to step out of the room while I spoke to Kent alone. I explained that while we were all grateful for his willingness to serve, given that he had only a year left, we couldn't pass up the opportunity to have Ed as chairman for the next five years.

"Well, I guess that's it then," he said and stood up. I could see his feelings were hurt, and I didn't blame him. As he left, he ruminated aloud about leaving the board early. That could lead to the media flap that Larry was hoping to avoid. In the ensuing days, I would call Kent regularly to try to persuade him to stay, and asked other board members to do the same. In the end, he remained and was gracious and helpful in the transition.

Ed had gone off to get ready for dinner with me, so I had a little time to deal with another urgent matter that had bubbled up earlier that same afternoon. The media had seized on a report of my personal finances and I'd become the story of the hour.

I had known from my arrival at Treasury that my financial disclosure form, all forty-seven pages of it, would be publicly available. The substance didn't worry me—my holdings had been closely vetted and approved—but I dreaded the possible invasion of privacy. As weeks passed and no reporter thought to ask for the information, I was beginning to hope it might never happen. But today that had changed. Bloomberg News obtained the form and broke a story headlined "Obama Automobile Adviser Rattner Worth at Least $188 Million." The reporters had culled from the thick document a handful of disclosures they thought hinted of conflicts of interest, such as the old speculation about my investments with Cerberus. The story also included an unequivocal statement from Jenni Engebretsen, the senior Treasury press person: "Like all employees, Steven Rattner was required to comply with financial conflict of interest rules, including divestitures where needed, and he has done so fully."

My phone and BlackBerry were still buzzing when Ed and I regrouped at Bobby Van's, a steakhouse up the street from Treasury. I was ready to share a couple of stiff drinks. I was hoping we'd get to a quiet discussion about GM, Ed's new role, and the tasks before us. But my cell phone kept ringing as Jenni responded to press inquiries well into the evening. All the major media did stories; all echoed the details that Bloomberg News had chosen. Jenni and I were struck by the incongruity: here we were in the midst of this huge auto crisis and the reporters covering it were more interested in my finances than in nearly everything else we were doing. To me it exemplified everything that was wrong with the media: gossip trumps substance.

I'd picked Bobby Van's on the theory that Ed, being Texan, would want red meat. But he had just spent several days on a ranch and ordered fish. I kept apologizing about the calls and my resulting inability to focus on our important business at hand. At last they tapered off and we managed to talk. I liked his honesty and self-confidence. With Ed, there was no guile. As dinner progressed, it became clear that for Ed—who cared about our country but was too sensible ever to volunteer for a job like mine—stepping into GM was a form of public service. He intended to put an end to the nonstop board meetings and teleconferences of recent years—GM's board would learn to do its business in crisply run, once-a-month events. "A board should have dinner one night, meet the next morning, and be on a plane by 2 P.M.," Ed said. We ended the evening agreeing, naively, that this was a realistic approach.

Coincidentally, the way we had laid out the timetable, Chrysler's bankruptcy ended up paving the way for GM's. Chrysler's sales held up far better than we expected, and would end up higher in May than they had been in April. People were still buying Chryslers, perhaps encouraged by the warranty guarantees and other safeguards we'd put in place. Meanwhile, the public seemed to be getting used to the idea that bankruptcy doesn't necessarily mean total ruin. And I felt far more comfortable that we had our arms around things than I had two months earlier, when I'd felt I was looking over the edge of a cliff.

May was consumed with the same complex prebankruptcy stakeholder discussions as we'd had with Chrysler—to my relief, GM's were less operatic. Instead of Sergio to contend with, we had the phlegmatic Fritz. Instead of Jimmy Lee, we had thousands of faceless bondholders represented by two coolly professional firms, the investment bank Houlihan Lokey and the law firm of Paul, Weiss, Rifkind, Wharton & Garrison.

But the Chrysler precedent also made it hard to change aspects of the process we hadn't liked. I felt a little bit of buyer's remorse about the Chrysler-UAW contract. While it was a vast improvement over previous agreements, I wasn't sure we had used our once-in-a-lifetime opportunity to full advantage. I respected Ron Gettelfinger's determination to protect workers' interests. And I sympathized. My many op-ed pieces over the years had warned that income inequality in America was an enormously important moral issue and that real wages for blue-collar workers had been declining, even in years of prosperity. At the same time, if these automakers couldn't be made competitive, we would have no jobs, an outcome much worse, to my mind, than jobs that were lower paid.

So I told Harry—who scarcely needed encouragement—that when it came to GM, we should be tougher on the UAW. But this just showed our ignorance of how organized labor works. Like the unions in many industries, the UAW used "pattern bargaining" in dealing with Detroit's Big Three. Once a contract was resolved with one automaker, the other two would generally accept the main provisions. Especially on wages and work rules and other matters affecting active workers, the concessions we had achieved with Chrysler became not only the floor but also the ceiling for most of what we could accomplish with GM.

Retiree medical benefits, paid through the VEBA, were a different story. In his crusade to cut GM's debt, Harry decided we should persuade the UAW to convert its entire $20 billion claim into GM stock—by which he meant not relatively safe and interest-bearing preferred stock, but mostly common shares. His view was that this would fully align the retirees (and the workers as future retirees) with the health of the company and help create a better partnership between management and labor than had existed in the past. It would also result in a far better balance sheet for GM, increasing the probability of success—a win-win proposition. (He was so excited about his idea that at one point he started explaining the difference between preferred and common stock to me!)

This would be a much more dramatic change than what had been negotiated with the Chrysler VEBA, where half the claim was converted to stock. Fritz, who was all for union concessions, thought the idea ludicrous and told Harry so—in essence, we were asking the union to bet its retirees' ability to pay their family doctor bills on the success of Shiny New GM. But Harry got Fritz and Ron Bloom to agree to give it a try.

Harry spent many hours pitching Lazard, the UAW's adviser, on the future value of the stock. Then, on May 19, the two sides faced off across the rectangular table in the Treasury's Griswald Library—Fritz and Ron Gettelfinger seated directly opposite each other; Ron Bloom down at one end, flanked by Harry and Sadiq; the UAW advisers at the other end. Despite his skepticism, Fritz delivered the proposal with seeming enthusiasm. In lieu of its $20 billion claim, the VEBA would own 15 percent of GM, plus $5 billion in preferred stock. In other words, three-quarters of the health-fund claim would be converted to common.

Gettelfinger barely said a word. He let the Lazard people respond. They rejected the offer, asking for a $10 billion note (similar to what we had agreed to with Chrysler) plus much more common equity. The gap was huge and the meeting had to end—Fritz and Gettelfinger were due at the White House for Obama's announcement of new national fuel-economy standards. But while Fritz hustled out of the room, Gettelfinger lingered until someone tapped him on the shoulder to remind him to get to the White House.

"The President can wait," he said through clenched teeth, obviously unhappy about all the UAW was being asked to do by an ostensibly friendly administration.

The deal he was being offered was worse than what the UAW and GM had discussed just a few months earlier, during the preparation of the viability plan and before Team Auto had set to work. Especially galling to Gettelfinger was that the UAW had been instrumental in helping Obama win key states, like Ohio and Indiana, that had large concentrations of union members and retirees. It chafed to hear Ron Bloom, on occasion, preface an offer with a pompous phrase like "I am empowered by President Obama to..." To Gettelfinger, Bloom was a Johnny-come-lately to the Obama effort, and yet here he was telling the UAW on the President's behalf what it must accept or do.

Ron, Harry, and Sadiq went down to the basement and crowded into Sadiq's cubicle to figure out the next step. The tension between our two alpha males was palpable. Harry felt that Ron was not sufficiently frugal with taxpayer dollars; Ron felt that Harry was utterly unrealistic about what the UAW could possibly accept. Finally, they agreed to propose the same 15 percent of Shiny New GM and $5 billion of preferred, but also to throw in a note for $2.5 billion.

The negotiation resumed late that night with a smaller group at the Washington office of our law firm, Cadwalader. Periodically, one of the principals would emerge to confer with aides before diving back in. Sadiq, who was set up near the conference room, crunched new scenarios on his laptop whenever Harry asked. Bloom found Harry's approach amusing; Harry would parse Sadiq's numbers as if they were the Dead Sea scrolls. To Ron, no analysis could definitively say what was fair or unfair; it came down to where a deal could be negotiated and whether it felt satisfactory. Notwithstanding their different methodologies, Ron and Harry gradually sweetened our offer. Gettelfinger reduced his demands, but hated the idea of a predominantly common-stock deal. At the start of the talks, Gettelfinger's hope had been to get as much cash as possible for the union's health trust—he needed the certainty of payments from GM or the government to keep paying out billions in health care benefits to his more than 330,000 GM retirees and surviving spouses in the U.S. He had no wish to own stock in GM. If the UAW had to accept an equity stake to get the deal done, he wanted it to be temporary, with the government agreeing to buy back the shares soon. But that wasn't going to happen. Bloom and GM dug in their heels.

Harry tried to position himself in the role of truth teller to both GM and the UAW. He called out Fritz on a profit-sharing formula that GM had rigged, Harry felt, to limit payouts to UAW members. He also told GM to quit exaggerating the compensation gap between UAW workers and those at Toyota, Honda, and Nissan plants. Meanwhile, he chastised the union for its notorious Viagra payments and the Jobs Bank, telling Gettelfinger, "You guys make yourselves look bad with that stuff."

Gettelfinger would have none of Harry. At one point, when Harry mentioned that his mother had worked in textile mills, Gettelfinger interrupted and snapped, "Harry, I don't want to hear your stories about factories." When Harry held forth on how the auto industry was broken and needed to be fixed, Gettelfinger asked sarcastically, "Excuse me, what is your name again?"

Later, he stopped Harry to ask, "I know you are an expert on autos, but have you ever met my retirees?" Harry took the needling in stride and kept pushing a predominantly common stock settlement.

By the time the meeting broke up, around 3 A.M., Ron and Harry had upped the bid to 17.5 percent of common, $6.5 billion worth of preferred, and a $2.5 billion zero-coupon note. Gettelfinger rejected that too.

Harry was upset as they left, but Bloom was sanguine: "I've seen him do this," he told Harry. "I'll call him tomorrow and he'll agree." The next morning, Bloom called Gettelfinger and threw in some warrants, or rights to buy GM stock later at a very high fixed price. The warrants still didn't provide the cash Gettelfinger wanted, but at least they guaranteed the UAW an additional share of the upside if GM turned out to be more valuable than anyone expected.

Gettelfinger's adviser from Lazard, Andrew Yearley, told him and his aides, "This is the last offer. It is decision time." Gettelfinger announced that he needed to think. He left the hotel to walk the streets on a delightful spring morning, the temperature still in the sixties and the humidity blissfully low.

There was no easy option. Gettelfinger could reject the offer, publicly calling out Obama for forcing large, unfair benefit cuts on older, retired Americans. But that would be the UAW putting a gun to the head of the administration and GM in a time of economic crisis and might cause a political backlash. Yet if he accepted the deal, his retired members would feel the cutbacks. Gettelfinger had promised many of those same retirees in 2005 and 2007—the years of previous GM contract talks—that they would not lose benefits or see their copays rise. Now he'd have to stand in front of them and deliver the bad news. One of his aides confided to Yearley that Gettelfinger "always takes these decisions very personally."

After about two hours of walking, Gettelfinger called Bloom and told him the UAW would accept the deal. He wasn't happy about it and ended the call by swearing at Bloom. Later he told his aides, "Everyone is sacrificing here. I think we can sleep at night knowing we did the best we could for our constituents."

Throughout all this, I had been holding my breath. No one outside Team Auto—not the UAW, not the company, not the press—seemed to realize that the balance of power was vastly different than it had been in the case of Chrysler. In taking on the UAW's Chrysler agreement, we were wielding a stick: President Obama had gone on national television and said that without a shared sacrifice by all stakeholders, the government would provide no further funding to Chrysler, leading to certain liquidation for the automakers and massive job losses for the UAW.

But with GM, Obama clearly wanted the company saved. His public statements, like "We cannot, and must not, and we will not let our auto industry simply vanish," and "I'm absolutely confident that GM can rise again," left us with no doubt that fixing GM was our mission.

Suppose Gettelfinger had simply refused any or all of our demands? We could still force GM into bankruptcy, which would void the UAW contract and, in theory, free GM to start over, either with the UAW or by hiring replacement workers. But I had meant what I'd said to the Chrysler banks when they'd whined about the amount of equity going to the retiree health trust: to make cars, we need workers. We did not believe that hiring non-union laborers to replace skilled UAW members was practical. The assembly of cars by GM involved hundreds of individual teams of five to six people executing highly specific tasks in forty-five- to fifty-second intervals. Nor did we believe that Barack Obama would be willing to discharge the autoworkers the way Ronald Reagan had fired the air traffic controllers in 1981. The idea that a Democratic administration would engage in union-busting was unimaginable.

So even in bankruptcy, we'd have been right back at the table with Gettelfinger—only then GM would be hemorrhaging cash and consumers would likely be holding off on buying GM cars until they saw the outcome of the standoff. It would have been a disaster.

I kept wondering why Gettelfinger didn't call our bluff. We had no backup plan, no notion of what we would do in that event. And we hadn't had much time to think about it. Fortunately, though he bargained hard on many issues, he stayed at the table and never threatened to blow up the whole deal. Although he kept his own counsel, his advisers speculated that he understood that the companies had to be fixed, and that as long as other stakeholders were sacrificing, he would go along. It's equally possible that he didn't realize how much leverage he had.

The deal gave GM substantially more financial flexibility than Chrysler had, and far and away the healthiest balance sheet among the Detroit Three. Instead of having to pay interest on a $10 billion note, as the VEBA had initially proposed, the company would be on the hook only for 9-percent-a-year dividends on the preferred—payments it could skip in a pinch. Though I couldn't prove it, I believed Harry's efforts had paid off. If he hadn't applied his powers of persuasion to selling the future value of GM shares, we probably would have been forced to give the VEBA a much larger percentage of the company.

Next it was Fritz who wanted to push the UAW harder. For years he'd been itching to revamp the UAW pension plan—its members were among the dwindling minority of American workers who still enjoyed traditional defined-benefit pensions, in which benefits are guaranteed no matter what they cost the employer. GM's pension expenses, much like its health care costs, had been rising for years, with cycle after cycle of union negotiations driving costs ever higher. ("Any little change," Fritz told me, "was like writing a $5 billion check to future retirees.") The market meltdown had compounded the funding challenge.

Fritz knew he couldn't ask for outright pension cuts; he wanted to freeze pensions as they were and have further benefits come in a plan similar to an IRA. Those changes alone would be worth billions to GM. But we had declined to address union pensions in the Chrysler negotiations, and when Fritz broached the subject to Gettelfinger late in the GM negotiations, the UAW chief turned him down flat: "We aren't going to sit in this room if pensions are on your list."

"OK, we'll get to that another time," said Fritz, who had been through countless difficult talks with the UAW leader.

When they heard about this, Ron and Harry discussed calling the UAW back to the bargaining table. But they concluded that attacking the union's sacred cow after virtually every other issue had been resolved could jeopardize the whole agreement. Failing to make meaningful changes in the pension plan became Harry's biggest regret. He felt it especially keenly in an airport bookstore two weeks later, when he noticed Roger Lowenstein's While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis.

I felt about the GM bondholders the same way I'd felt about Jimmy Lee at Chrysler: they had made a poor loan and deserved to be treated accordingly. In a conventional bankruptcy, the GM bondholders, who were junior creditors, would get little or nothing. Nevertheless, the firms representing them were fighters. They launched a populist PR campaign, pointing out that among the bondholders were not only workers' pension funds but also people of limited means. "GM Bondholders Are People Like You and Me" read the headline of a Wall Street Journal op-ed, ostensibly written by a retired blue-collar worker. There was truth to this: GM had marketed some of its bonds to individuals, selling them in face amounts as low as $25. Thus it had thousands and thousands of small bondholders. Unfortunately, there was neither logic nor a mechanism for treating them differently from the institutional investors, which held some 80 percent of the debt.

It didn't take Harry and Matt long to discover that we were in a difficult negotiating spot. Back in April, in order not to be accused of foot-dragging on GM's bond exchange plan, we had offered to give bondholders a 10 percent stake in GM in exchange for 90 percent of the bonds. But that was before we decided to invest our new money as equity, which had the effect of making a 10 percent stake hugely more valuable because the new GM would not be up to its axles in debt.

Why should the bondholders get this windfall? I wanted to adjust the percentage so the dollar value of our offer stayed the same. But Harry and Matt resisted the idea.

"They're fixed on the 10 percent," said Harry.

"Ridiculous!" I said. "Ten percent is worth at least twice as much now as it was before. We need to dial it back to less than 5 percent."

"They're not going to buy it. They'll think they're getting less value, not just a smaller percentage."

"But this isn't Joe Six-Pack you're talking to," I protested. "They're very sophisticated advisers. I think they'll understand." To my surprise, Harry and Matt disagreed.

We didn't have to reach a deal with the bondholders, I pointed out. Arguably, they didn't deserve anything, and we could fight it out in bankruptcy court. This prospect made Matt very unhappy. A knockdown dragout fight with the bondholders would mean delays and uncertainty, and possibly billions of dollars more to hold GM together if the bankruptcy process stalled. On the other hand, Matt pointed out, by making a deal with bondholders representing at least 51 percent of the debt, we would eliminate a major risk of delay in bankruptcy court.

Reluctantly, I saw the logic of their argument and told them to proceed. Naturally the bondholders still wanted to negotiate right down to the wire; in the end Harry became convinced that even 10 percent of the equity would not get us an agreement and pushed me to sweeten the pot with some warrants. Even more reluctantly, I agreed to that too. We valued the package at about 12 to 15 cents on the dollar, more than what they deserved (zero) but considerably less than the 33 cents that Corker and Bush had been prepared to let them have.

The capital structure of Shiny New GM was finally taking shape. It was radically different from what we'd imagined, as though we'd set out to build an Impala and ended up with a Volt. Rather than a small stake, the Treasury would own 60.8 percent, and the remaining 39.2 percent would be split among the VEBA (17.5), the bondholders (10), and Canada (11.7).

But while the percentages took shape, the overall capital need remained a moving target. All through May, Team Auto struggled to nail down how much we'd have to inject into GM at its bankruptcy filing. The company's list of needs was vast, and every few days new items would pop up, further evidence of its lack of a real handle on its finances.

The uncertainty was unnerving for our Canadian allies. They had been standup partners from the start. They'd matched the U.S. government's total $12 billion Chrysler investment with $3 billion of their own, a sum roughly proportional to the percentage of Chrysler production across the border. And while GM mattered less to the Canadians—it had fewer employees there—they were committed to making a comparable investment in this restructuring too, which was where the headaches began.

On May 12, the first time we met with the Canadians about GM, Ron and Sadiq told their emissary, Paul Boothe, that the GM investment would total $50 billion (counting the $15.4 billion already put in and $34.6 billion of new money to come), and warned that the figure could grow. Then Ron talked with Boothe about how much Canada would contribute. They agreed on $8 billion to $10 billion. It would be the single biggest investment the Canadian government had ever made in a business.

In exchange, the Canadians wanted GM to sign a "vitality agreement," a guarantee that the new GM wouldn't turn around and cut its Canadian production and workforce. Ironically, we had inserted just such a provision into Chrysler's agreement with Fiat, for fear that Fiat would cut too many American jobs. Boothe made it clear that a vitality agreement was a political necessity for the prime minister. Harry thought signing such an agreement was bad economics and bad for the business. If we were going to truly let GM operate as a private company, we shouldn't be tying its hands, he argued.

In addition, the UAW had made concessions in its negotiations with GM to allow a small car that was to be built in Korea to be built economically in the United States instead. This was a source of excitement for Rahm Emanuel, who saw the evident political advantage in such a development. (When finally announced, the new plan generated far less public notice than we had hoped. Critics suggested that we had pressured GM to shift production to the States.)

The decision on the small car meant that the percentage of GM's cars headed for sale in the U.S. that also got assembled in the U.S. was expected to rise to 70 percent from the current 66 percent. Nonetheless, the question became part of another emotional meeting in Larry's office. As had been the case with Chrysler, Ron and Harry took opposite sides. To Ron, what was the point of saving GM if we weren't going to safeguard American jobs? While I sympathized with Harry's view, this ultimately became a practical decision: if the Canadians weren't going to invest without a vitality commitment, then obviously we needed to give them one. And in my mind, giving them one and not taking one for ourselves failed the Washington Post test.

To the Canadians' dismay, though, the all-in number kept going up. Boothe, an affable, gray-haired, goateed economist whose title was senior associate deputy minister of industry, would come to Washington only to have to fly back to Ottawa to tell his bosses the new number and get clearance. A week later, the number rose to $54 billion. Then, on May 27, it reached $59 billion, with Canada now on the hook for nearly its full $10 billion.

Harry was partly responsible, unbeknownst to the Canadians. He felt that GM's inadequate financial controls posed large risks for the business and heavily discounted all of the cash projections he received from management. He was convinced that GM needed a margin of safety to offset these poor controls. If we paid in too much, he figured, as 60.8 percent owners American taxpayers would get back most of any excess and the Canadians would get their share (although the 27.5 percent "leakage" to other shareholders annoyed him no end).

Our Canadian partners grew grumpy as the funding requirement increased. Both the commonwealth government in Ottawa and the provincial government of Ontario dispatched teams to monitor the bankruptcy preparations. Team Auto didn't have enough staff to tend to them all. One evening during the hectic final week, our young colleagues David and Sadiq found themselves in a conference room at Weil, Gotshal & Manges, Treasury's legal adviser, explaining to a dozen Canadian officials why we'd just added $5 billion to the deal.

The Canadians were also concerned about GM's management. Sergio had impressed Boothe much more than had Fritz, and the emissary had told colleagues, "These GM guys don't have the same sense of fear that Chrysler does. I would feel better if GM had a Sergio." Fritz was moving too slowly, in Boothe's mind, and seemed like just another GM guy rather than the fresh blood the company needed.

As the bankruptcy filing neared, Boothe expressed these concerns to Feldman and Markowitz. "We know you are driving the bus here, but we are uncomfortable with him," he said and added, "We don't have anyone else who could do it, but we don't think it is him."

My month was spent juggling pieces of everything. Senators and representatives peppered me with calls, lobbying to keep open GM facilities in their states or districts. Often these calls sounded pro forma, as if the legislator were checking a series of boxes so he or she could attest that everything had been tried. Other calls were aggressive, occasionally hostile. I knew better than to antagonize congressmen so I always listened politely. Sometimes the monologue droned on so long that I could get a number of e-mails answered.

I was also obliged to take courtesy meetings with ambassadors from countries where GM operated, as well as meetings for the sake of bureaucratic ritual, such as the procedure for finalizing TARP investments. Still other meetings were favors to people important to the administration, like my session with a group from Utah who had no money but a great idea to manufacture an electric Hummer. If nothing else, such visits were a constant reminder of the scope of the auto crisis. One day, an old friend who had become CEO of Avis Budget came by and explained how the collapse of the auto finance market threatened his company's ability to pay for the cars it needed for its business.

GMAC hung over me as a huge piece of unfinished business that could torpedo everything else we were accomplishing. I spent days with Brian Stern and Rob Fraser figuring out how to structure and value the capital infusion that GMAC was going to need. Even more frustrating was continuing to do battle with the FDIC. As a way to keep the pressure on, we had proposed that GMAC take on the Chrysler financing business for only two weeks, seemingly plenty of time to tie up loose ends with the FDIC.

But the FDIC kept retrading and piling on new asks. Sheila Bair's designated negotiator was Chris Spoth, the rather meek career FDIC official whom we had previously encountered. He seemed to have no authority whatsoever. More than once, we would come to an understanding on a point that we would confirm by e-mail, only to receive an e-mail back the next morning denying that an understanding had been reached. At another juncture, the FDIC asked for a letter saying that Treasury would stand behind GMAC no matter what, and then kept changing the language. Tim thought the new language would make the FDIC look weak and tried, unsuccessfully, to reach Bair. "I'll write whatever you guys want, but I really think this is counter to your objective," he told Spoth. Of course Spoth needed to check with Bair. "You're right, let's go back to the other language," he responded a few minutes later. (Bair would duck even Tim when she wanted to; once her office said she was on a plane when in fact she wasn't.) Bair also wanted a letter from Tim thanking her for assisting our effort; we took to calling this the "great American letter."

Most frustrating was that after agreeing to provide the help we were seeking, the FDIC came back and increased the amount of capital that it wanted GMAC's bank (Ally) to maintain to far beyond that required of any other bank. The excessive capital requirement would have many negative repercussions. It would reduce GMAC's liquidity at the holding company and therefore its financial flexibility. Perhaps more importantly, it lowered the bank's lending capacity, the opposite of what we were trying to achieve. And it reduced GMAC's profitability and therefore the value of the $13.1 billion of new TARP money that we were preparing to invest. So the FDIC's unreasonable requirement would cost U.S. taxpayers significant money. Whose side was the FDIC on, I wondered. We whittled back the duration of the higher capital requirement a bit but ultimately had to swallow and agree. We had no alternative.

The political pressure on Team Auto steadily increased. The impacts of Chrysler's restructuring were beginning to be noticed and objected to. For instance, Chrysler had decided to leave behind workers' compensation claims in its Old Carco, which effectively left the state of Michigan holding the bag for more than $100 million in obligations, prompting angry calls from the governor. Another commotion was triggered by a botched announcement by Chrysler about closing eight U.S. plants: it mistakenly gave the impression that an engine factory was being shut in order to move production to Mexico.

The politics around GM, with its greater size and complexity, not to mention its iconic status, promised to be even more intense. Our long to-do list was full of pitfalls. One day Fritz called me to propose moving GM headquarters from the Renaissance Center to GM's Tech Center in suburban Warren, where we had driven the Volt back in March. The move would cut costs, he said, as well as symbolize the leadership's determination to become more down-to-earth and hands-on. I thought the idea was great, just the kind of action I was hoping to see from Fritz. But when I described it to Deese, he went nuts. "Are you out of your mind?" he said. "Think what it would do to Detroit!"

Though small in financial implications for the company—the headquarters was worth perhaps $165 million, compared to the $626 million that GM had paid for it just a year earlier—GM's departure would be a major blow to Detroit. In a one-year period, the once proud city that was already suffering with one of the worst unemployment rates in the country, and among the worst murder rates, would see two of its biggest employers go bankrupt, its flamboyant ex-mayor Kwame Kilpatrick convicted of perjury, and its NFL franchise, the Detroit Lions, become the first in football history to go 0–16.

Deese had some people analyze what a mostly vacant RenCen would mean to Detroit real estate. The estimate: a double-digit hit on already deflated real estate prices. Fritz proposed donating the RenCen to the city—though who would actually use it was unknown.

Leaving the RenCen made strategic sense, however, and was supported by Harry and David. The Tech Center had lots of empty space and much larger floors, so more departments and people could sit near each other, improving teamwork and communication in a culture that desperately needed more of both.

The debate, not surprisingly, soon moved beyond Team Auto. Gene Sperling was one of many to fight the move. "It's over for Detroit if you do this," he yelled in a meeting at Treasury. "Don't do this to Dave Bing"—the city's new mayor, a former NBA star and successful auto-supplier entrepreneur. "He's a good man trying to do a good thing." The city relied on GM for $20 million a year in tax revenue, Gene pointed out, and the blowback would be fierce. Deese checked with Larry, who in turn spoke to Rahm, and word came down that the move would be a bridge too far. Fortunately, this unique intervention into a specific GM matter was never leaked to the press, saving us from having to explain how it comported with our policy of letting GM and Chrysler manage their own affairs.

We'd so far been able to avoid the scalding controversy over executive compensation, but no more. The issue found us as we worked through a $7.9 billion assortment of GM obligations called "other pension and employment benefits." Lumped under this innocuous-sounding label was a dizzying hodgepodge of programs, including pension plans for thirteen "splinter" unions, most of which no longer had any active workers at GM. This last item alone was costing GM more than $300 million a year.

But also on the list were pension obligations for senior executives—including $22.1 million owed to Rick Wagoner. Like many big companies, GM provided a so-called supplemental pension for highly paid executives. While GM's basic pension plan for all employees was backed by nearly $100 billion of investments, this "SERP" was not backed by anything except the company's promise to pay. Of course no one—not the company, not the executives, not the high-level retirees—ever imagined that GM could go bankrupt, because in bankruptcy these retirees had the same lowly status as bondholders. In other words, retired GM executives could see this hefty benefit wiped out. We knew we could try to prevent that by making the same argument we'd used to justify funding the VEBA: just as you need workers to make cars, you need executives to run the company, and wiping out the pensions of retired executives would demoralize active ones. But the atmosphere around executive compensation was way too charged for us to take that position.

This was an issue above my pay grade, so I put it on the agenda for one of our late-afternoon updates with Larry. He pounced on it as if the future of the Obama administration rested on our response. Large reductions would be required, he said; that much was clear. To maintain the fiction that such decisions were being made by GM and not by us, Larry set forth four principles for GM to follow in cutting the $7.9 billion obligation. Perhaps we shouldn't have been surprised when GM came back with a proposal that was blatantly tilted in favor of the executives at the expense of the splinter unions. It took many days and several rounds of discussions to arrive at changes that fit within Larry's dictates. The executive pensions would be cut by two-thirds.

But this meant that Rick Wagoner was owed $7.1 million. Larry's first instinct was that Rick should get little or nothing, given that GM had gone broke on his watch. "Do you know what a senator gets for his pension?" he asked me, implying that no public servant would understand why Rick should get millions. I felt bad for Rick; he certainly had failings as a CEO, but he had put his heart into the job and believed in GM so strongly that he had never cashed out any of his stock. I argued that Wagoner should be treated no better or worse than the other retired executives. In the end, Larry agreed.

Larry generally kept Rahm and the President informed of potential flashpoints in Team Auto's work, but he blocked out time during the President's Daily Brief on Friday, May 29, for a last-minute review. Three days hence, on June 1, the President would announce that the federal government was putting General Motors into Chapter 11. Larry didn't want to take the chance there'd be a political surprise.

Unlike the first time Larry had dragged me to the Oval Office, I arrived at the White House knowing we were scheduled to meet with the President. I also had been told to expect cameras—NBC was on the premises shooting a special called A Day in the Life of Obama's White House. As I approached the West Wing entrance, I could see a video crew taping the arrivals. Making my way to Larry's office, I encountered camera crew after camera crew crowding the tight confines of the West Wing. (I later learned that thirty-two cameras were prowling the White House that day.)

We headed downstairs to the Oval, where we stood waiting by Katie Johnson's desk. Promptly at 10 A.M., the door opened, Hillary Clinton emerged, and it was our turn. With NBC in tow, we took our seats on the couches and chairs facing the President. The briefing began with pleasantries and then the President asked Larry to open the discussion without any "market sensitive" information. Larry did his best under the awkward circumstances until, mercifully, Rahm evicted the cameras and we got to work.

We reviewed for the President the progress on the restructuring: the improved cost structure, the reduction in labor costs, the additional $30.1 billion that we proposed to inject. He was familiar with all these items, and I moved through them briskly, saving the most worrisome for last.

While a majority of GM's bondholders had accepted our final proposal, we expected dissidents to fight us in court, just as the Chrysler lenders had done. In this case, there was a chance they would renew their campaign portraying GM and the administration as callous toward small investors.

Next we discussed the UAW's latest public stance. Rather than use the bankruptcy to focus on job cuts (polls showed many Americans thought UAW workers were overpaid), the union was highlighting the fact that GM, like many manufacturers, had been gradually moving production out of the United States to countries with lower labor costs. The union was complaining that the restructuring would transfer more production to Mexico and Asia.

This was technically true, we told President Obama. However, the production was coming from Canada, not the United States, and the move had been set before the restructuring agreements. We explained the vitality commitments and other arrangements now in place to protect jobs in both countries henceforth.

Larry and Diana outlined the "USG as Shareholder" policy, which would be unveiled in fact sheets accompanying the President's speech. We also had an unspoken understanding that, following an initial public offering by Shiny New GM, the government would sell at least 5 percent of its shares each year and be completely divested within eight years. This had been heavily litigated between Team Auto and Larry. Harry and I hated the idea of committing to stock sales that might not be financially optimal, but Larry had been adamant, and understandably so. The President seemed pleased.

Finally, we came to executive compensation. I briefly sketched the background, trying to avoid the mind-numbing complexity of splinter unions and SERPS to get to the item that we wanted to be sure President Obama signed off on: Rick Wagoner's pension. I explained the arrangement that would pay him $7.3 million over five years, and I could see the President's jaw muscles tighten. Suddenly I felt that I was indeed in the presence of a community organizer; the President plainly had difficulty with the notion of writing a check that was about one hundred times the annual income of a GM worker to the CEO who had brought the company down. Obama grimaced and reluctantly acquiesced. I found it striking that the President of the United States had spent more time on an issue of executive pay than on the question of whether to dismiss a major CEO in the first place.

The cloudy, humid day ended with a scramble. GM, which had been trying to sell Hummer for months, had found a buyer—a Chinese company that none of us had heard of. Deese and I were both a bit unnerved by this, as some purchases of U.S. businesses by companies with headquarters in places like the Middle East and China had become controversial. We immediately decided to take the matter to Tim and Larry, and gathered in Larry's office late that afternoon. His first instinct was to worry. Down at the other end of the table, Tim suddenly interjected, "Guys, if this were a British company, would we be having this conversation?"

"No," we replied unanimously.

"Okay, then. End of conversation."

With that, we scattered for our weekend of work. Deese, who lived in Washington, stayed at his small desk at the White House working on fact sheets and talking points and revisions for the President's speech. Ron drove home to Pittsburgh to spend Saturday and Sunday in marathon calls with German officials, patiently reiterating our position that no more U.S. taxpayer dollars would flow into Opel. Harry, Matt, David, Brian, and Sadiq camped in New York at the law offices of Weil Gotshal, GM's bankruptcy adviser. Harry jetted off on the last flight to Boston on Friday night to spend a few hours at his Harvard reunion before returning on the first flight to New York on Saturday morning. "He just wants to bask in the glory of his big assignment," grumbled a banker who had felt Harry's lash. I hunkered down at my house north of New York City for two days of nonstop e-mails, phone calls, and faxes.

As we prepared, one small concern was that Tim Geithner was scheduled to be in China on the day of the President's address. To me, this seemed like no big deal—it wasn't as if he were off playing golf—but the communications folks fretted about it. On Saturday afternoon, my cell phone rang. I heard static and then official-sounding voices. Finally, one asked me to hold for Secretary Geithner. I realized that Tim was calling from his plane on his way to Beijing.

"Is everything okay?" he asked.

"Fine," I replied. The conversation ended almost as soon as it began. I was puzzled until a day or so later, when I saw in a press report that an "administration official" had said that Tim was in regular contact with the Auto Task Force during his trip. Now I understood. (I would later learn that the ever-attentive press department also had nixed a Ping-Pong match that Tim had been scheduled to play on Monday, the day that the President would be speaking.)

For Matt, these hours were critical, as he supervised what would be a devilishly convoluted bankruptcy filing. The documents described in intricate detail the two GMs that would be created out of the 290 GM legal entities that existed.

Left behind as the old GM—shares of which would continue to be traded publicly and whose name would be changed to Motors Liquidation Company to avoid confusing investors—was a company that would be massive in its own right. For example, MLC would own 127 properties, almost all in Michigan and Indiana, with more than forty-eight million square feet of floor space, nearly the size of eight Pentagons. Many of these had been out of service for years, legacies of the era when GM commanded half of the American car industry. We would also leave behind 5,000 assembly-line robots, 200 miles of conveyor belts, even a small golf course. And we were leaving behind liabilities: $27 billion of unsecured debt, hundreds of millions of dollars of environmental liabilities, splinter unions' retiree benefits, and unwanted supplier contracts. Even without any active operations, Motors Liquidation would stay in business until all of the assets had been disposed of and all of the claims against it resolved, a process that Matt believed could take two to four years.

Shorn of these extraneous assets, Shiny New GM would emerge to operate the 121 properties that would remain in the U.S. and would employ more than 200,000 workers around the world. The company would be dramatically reconfigured, with $65 billion of liabilities stripped from its balance sheet and its annual structural costs in North America reduced by $8 billion.

While I would later have a tinge of regret at not having achieved greater concessions from the stakeholders, we had far exceeded the requirements that Bob Corker and the Bush administration had established as part of the initial bailout. Instead of the two-thirds reduction in unsecured debt mandated by the Bush loan agreements, we eliminated all of these obligations. Instead of equitizing half of the GM VEBA, we converted 87.5 percent to stock. And so on. None of this would have been possible without President Obama's determination to do the right thing. While both Tim and Larry had assured me of this in the course of our early discussions, I had gone into my assignment nervous that political pressures would ultimately compromise the outcome. I shouldn't have been. When President Obama told us on March 26 to be tough and commercial, he meant it. Without his standing firm, we surely would have ended up with a far worse result.

A major concern for us now was making sure GM would not have to seek court protection for any of its subsidiaries around the globe. Our tight timeline for getting through a U.S. bankruptcy was challenging enough; engaging other countries' bankruptcy procedures was sure to slow down, or perhaps doom, our whole effort. We spent hours reviewing the debt of subsidiaries in places like Russia, Colombia, and Thailand to determine whether funding their needs would violate the Washington Post test. Meanwhile, Ron focused on reassuring the Canadians; Matt and Harry on reviewing the legal strategy and documents to guard against last-minute snafus; David on an eleventh-hour brouhaha with a group of hedge funds that had bought bonds issued by GM Nova Scotia; Sadiq on providing numbers and analysis to everyone. Harry's final work frenzy was so intense that when Feldman gathered the team late in the day to make sure all the preparations were on track, Harry dialed into the meeting from the conference room next door—he didn't want to waste the seconds it would take to walk ten feet and exchange pleasantries as the meeting began.

The closing crunch was particularly unnerving for supporting players who hadn't been through the Chrysler bankruptcy. Just as GM was putting the final touches on its bankruptcy petition, a senior attorney at the Treasury Department, Laurie Schaffer, objected to the whole idea of our forming Shiny New GM. She argued that this would make the new GM an arm—an "instrumentality"—of the federal government, which would mean that the government would be responsible for any GM liability, including any lawsuit brought against it. Matt had reviewed our approach repeatedly with Treasury officials during the month of preparations, and everyone was comfortable that it did not present the "instrumentality" risk. Everyone except Laurie Schaffer, who now suggested that we have the VEBA form the new company. It was a ridiculous idea. Matt tried, not very patiently, to convince her otherwise. When that failed, he called Tim's deputy, Neal Wolin, and got her overruled.

Sunday afternoon, Ron, Harry, and I returned to Washington, where we rejoined Deese and again gathered that evening in the Oval Office to stand by as President Obama made another set of outreach calls to politicians. Just two months had passed since the first session of calls we had witnessed, when Obama had paused to watch Tiger Woods on TV. By now I had spent more time in the Oval Office than do many officials of far higher rank in the course of an entire administration. I never imagined a presidential meeting could feel so routine. Exhaustion was part of it—everyone on Team Auto felt a little numb after months of doing battle with some of America's biggest economic dragons.

The next morning, Ron and I took our appointed places as potted plants on the steps in the Grand Foyer of the White House as President Obama announced the reorganization of General Motors. I couldn't see beyond the lights, but I knew that across the large room, somewhere behind the banks of cameras and reporters, was the rest of the team. Witnessing the President talk about our work was one of the few perks we could offer our extraordinarily talented and dedicated colleagues.

"Our goal," President Obama was saying, "is to get GM back on its feet, take a hands-off approach, and get out quickly." I relished hearing him deliver a few sentences I had helped craft: "Many experts said that a quick, surgical bankruptcy was impossible. They were wrong. Others predicted that Chrysler's decision to enter bankruptcy would lead to an immediate collapse in consumer confidence that would send car sales over a cliff. They were wrong, as well."

Unbeknownst to me, a small drama was unfolding downstairs. Like everyone on our team in New York, David Markowitz had gotten almost no sleep during the final frenzy of preparation. They'd all come to the White House for this occasion, but as he walked to the Grand Foyer, David felt dizzy and sick. Sadiq tried to steady him, but David could go no further. Hearing of David's dizziness, several White House aides appeared out of their warrens to offer chocolates, presumably to cure a sugar low. David and Sadiq turned back, and someone pointed them to the White House infirmary—two small offices used by the President's physicians. A doctor checked David over, fed him fluids, and asked him to sit and rest. Sadiq was disappointed on David's behalf but didn't want to miss the President's statement, so he hurried back upstairs.

Twenty minutes later, sitting groggily in his trousers and undershirt, David heard a commotion at the door. In came President Obama, who had just finished his speech and was in search of a couple of Tylenols. Our young Team Auto colleague found himself shaking hands with the man on whose behalf he had been working around the clock for three months.