HOUGHTON MIFFLIN HARCOURT
BOSTON NEW YORK
2010
Copyright © 2010 by Steven Rattner
All rights reserved
For information about permission to reproduce selections from this book,
write to Permissions, Houghton Mifflin Harcourt Publishing Company,
215 Park Avenue South, New York, New York 10003.
Library of Congress Cataloging-in-Publication Data
Rattner, Steven.
Overhaul : an insider's account of the Obama administration's emergency
rescue of the auto industry / Steven Rattner.
p. cm.
Includes index.
ISBN 978-0-547-44321-8
1. Automobile industry and trade—Government policy—United States.
2. Bankruptcy—Government policy—United States. 3. Industrial policy—
United States. 4. United States—Economic policy—2009– I. Title.
HD9710.U52R38 2010
338.4'76292220973—dc22 2010033188
Book design by Melissa Lotfy
Printed in the United States of America
DOC 10 9 8 7 6 5 4 3 2 1
Cast of Characters [>]
Prologue [>]
1. Dead Man's Curve • [>]
2. The Bridge to Obama • [>]
3. Mr. Rattner Goes to Washington • [>]
4. "F**k the UAW" • [>]
5. Rick, Bob, and Sergio • [>]
6. The B Word • [>]
7. "Is This Unanimous?" • [>]
8. Jimmy Turns Bright Red • [>]
9. Chrysler's Last Mile • [>]
10. Harry Wilson's War • [>]
11. Epic Bankruptcy • [>]
12. Dealer Nation • [>]
13. The Chief Executive Shuffle • [>]
Epilogue • [>]
Note on Sources [>]
Acknowledgments [>]
Index [>]
TEAM AUTO (U.S. Treasury, unless otherwise noted)
RON A. BLOOM
CLAY CALHOON
BRIAN DEESE (National Economic Council)
DIANA FARRELL (National Economic Council)
MATTHEW FELDMAN
ROBERT FRASER
SADIQ MALIK
DAVID MARKOWITZ
PAUL NATHANSON
BRIAN OSIAS
STEVEN RATTNER
BRIAN STERN
HALEY STEVENS
HARRY WILSON
ADVISERS TO AND STAKEHOLDERS IN CHRYSLER
ALFREDO ALTAVILLA, in charge of Fiat power-train technologies
STEPHEN FEINBERG, managing partner of Cerberus Capital Management (owner of Chrysler)
ANDREW HORROCKS, former managing director of UBS (adviser to Fiat)
THOMAS LAURIA, partner of White & Case (counsel to certain Chrysler senior lenders)
JAMES "JIMMY" LEE JR., vice chairman of JPMorgan Chase (Chrysler senior lender)
ROBERT MANZO, executive director of Capstone Advisory Group (adviser to Chrysler)
SERGIO MARCHIONNE, CEO of Fiat; later appointed CEO of Chrysler (since June 2009)
ADVISERS TO TEAM AUTO
XAVIER MOSQUET, senior partner of Boston Consulting Group
JOHN RAPISARDI, partner of Cadwalader, Wickersham & Taft (counsel)
TODD SNYDER, managing director of Rothschild
JOHN "JACK" WELCH JR., former chairman and CEO of General Electric
BUSH PERIOD
JOSHUA BOLTEN, White House chief of staff
CARLOS GUTIERREZ, secretary of Commerce
KEITH HENNESSEY, director of the National Economic Council
DAN JESTER, Treasury contractor
JOEL KAPLAN, White House deputy chief of staff for policy
HENRY "HANK" PAULSON, secretary of the Treasury
JOSHUA STEINER, Obama transition adviser
CANADA
PAUL BOOTHE, senior associate deputy minister of Industry Canada
CHRYSLER
ROBERT KIDDER, chairman (since June 2009)
RONALD KOLKA, CFO
THOMAS LASORDA, copresident
ROBERT NARDELLI, chairman and CEO
JAMES PRESS,co-president
CONGRESS
SEN. ROBERT CORKER (R-Tennessee)
SEN. CHRISTOPHER DODD (D-Connecticut)
REP. BARNEY FRANK (D-Massachusetts)
REP. STENY HOYER (D-Maryland), House majority leader
SEN. MITCHELL MCCONNELL (R-Kentucky), Senate minority leader
REP. NANCY PELOSI (D-California), Speaker of the House
SEN. HARRY REID (D-Nevada) Senate majority leader
SEN. CHARLES SCHUMER (D-New York)
FINANCIAL REGULATORS
SCOTT ALVAREZ, general counsel of the Federal Reserve Board
SHEILA BAIR, chairman of the Federal Deposit Insurance Corporation
BEN BERNANKE, chairman of the Federal Reserve Board
ROBERTA MCINERNEY, deputy general counsel of the Federal Deposit Insurance Corporation
CHRISTOPHER SPOTH, senior deputy director for supervisory examinations at the Federal Deposit Insurance Corporation
FORD
LEWIS BOOTH, CFO
WILLIAM "BILL" FORD JR., executive chairman
ALAN MULALLY, CEO
ZIAD OJAKLI, group vice president of government and community relations
GENERAL MOTORS
DANIEL AKERSON, CEO (as of September 2010)
DAVID BONDERMAN, director
TROY CLARKE, president of GM North America
KENNETH COLE, vice president of global public policy and government relations
GARY COWGER, group vice president of global manufacturing and labor relations
NICHOLAS CYPRUS, controller and chief accounting officer
GEORGE FISHER, lead director (until July 2009)
STEPHEN GIRSKY, director; later appointed vice chairman of corporate strategy and business development
FREDERICK "FRITZ" HENDERSON, COO; later appointed CEO (March-December 2009)
KENT KRESA, director and interim chairman (March-July 2009)
MARK LANEVE, vice president of sales and marketing of GM North America
PHILIP LASKAWY, director
CHRISTOPHER LIDDELL, CFO (since January 2010)
ROBERT LUTZ, vice chairman and responsible for global product development
KATHRYN MARINELLO, director
PATRICIA RUSSO, lead director
JOHN SMITH, group vice president of corporate planning and alliances
CAROL STEPHENSON, director
G. RICHARD WAGONER, chairman and CEO (until March 2009)
EDWARD WHITACRE, chairman (July 2009 to December 2010) and CEO (December 2009 to September 2010)
RAY YOUNG, CFO; later appointed vice president of GM International Operations
MICHIGAN POLITICIANS
DAVID BING (D), mayor of the city of Detroit
REP. JOHN DINGELL (D)
GOV. JENNIFER GRANHOLM (D)
SEN. CARL LEVIN (D)
REP. SANDER LEVIN (D)
SEN. DEBORAH STABENOW (D)
OTHERS
ALVARO "AL" DE MOLINA, CEO of GMAC
CARLOS GHOSN, CEO of Renault-Nissan
JOHN MCELENEY, chairman of National Automobile Dealers Association
TREASURY DEPARTMENT
STEPHANIE CUTTER, chief spokesperson
JENNI ENGEBRETSEN LECOMPTE, spokesperson
KENNETH FEINBERG, special master for TARP executive compensation
TIMOTHY GEITHNER, secretary of the Treasury
ALAN KRUEGER, assistant secretary for economic policy
MARK PATTERSON, chief of staff
GENE SPERLING, counselor to the secretary of the Treasury
UNITED AUTO WORKERS
RON GETTELFINGER, president
GENERAL HOLIEFIELD, vice president and director of Chrysler department
BOB KING, vice president and director of Ford department; later elected president
CAL RAPSON, vice president and director of General Motors department
ANDREW YEARLEY, managing director of Lazard (UAW's financial adviser)
U.S. BANKRUPTCY COURT, SOUTHERN DISTRICT OF NEW YORK
JUDGE ROBERT GERBER, oversaw the bankruptcy proceedings of General Motors
JUDGE ARTHUR GONZALEZ, oversaw the bankruptcy proceedings of Chrysler
WHITE HOUSE
DAVID AXELROD, senior adviser to the President
RAHM EMANUEL, chief of staff
ROBERT GIBBS, press secretary
AUSTAN GOOLSBEE, member of the Council of Economic Advisers
CHRISTINA ROMER, chair of the Council of Economic Advisers
LAWRENCE SUMMERS, director of the National Economic Council
THE OVAL OFFICE has no proper waiting room, only a small anteroom in which President Obama's "body person," Reggie Love, and his secretary, Katie Johnson, are usually seated. Against the wall is a small TV, normally used to monitor news channels. But on this Sunday evening near the end of March 2009, it was tuned to the Arnold Palmer Invitational golf tournament, where Tiger Woods (then still heroic) was making a long-awaited return from knee surgery.
A few minutes before 7:30 a handful of us from the President's auto industry task force had followed chief economic adviser Larry Summers down a narrow flight of red-carpeted stairs and along a short corridor to this room. We'd spent the past hour in the rabbit warren of offices on the second floor of the West Wing, reviewing once more the key documents for a nationally televised announcement President Obama was to make the next day, the seventieth of his presidency. For Obama, this would be among his first major public actions; for our little task force, it was the point of no return.
Since the task force's hasty formation in February, we had been meeting with General Motors and Chrysler, both of which were being fed intravenously with taxpayers' cash. Dozens of consultants, investment bankers, and other outside experts had presented their views, and the question of what the government should do with the struggling automakers had been debated extensively up the administration chain of command. Finally, in tense meetings at the White House a few days before, the President had made his decisions. Those decisions had remained secret until now; tonight he would call the Michigan lawmakers to alert them to what he was planning to say the next day.
The President hadn't come downstairs from his living quarters yet, giving us a few minutes to root for Tiger's comeback—for me, a welcome distraction from worrying about whether our plans for the largest government intervention in industrial America since World War II could work. We had had only five frenzied weeks to prepare for this moment. One more time I mentally reviewed those plans, which included additional billions in taxpayer funding for General Motors and Chrysler and several other controversial and risky measures. What could go wrong? I'd asked myself over and over. As a prime mixer of the strong medicine that the President was about to administer, I was sure that if disaster ensued, all eyes would be on me.
In particular, I worried about the much-discussed prospect of putting the automakers into "controlled bankruptcy," a radical approach that defied conventional wisdom. While the President's speech the next day would leave open the possibility that bankruptcies might be avoided, I knew that the mere mention of it—let alone actually taking the step—risked imploding the auto companies, crippling thousands of related businesses, vaporizing millions of jobs, and intensifying what was already a deep recession across the Midwest. With America in the midst of the worst financial crisis since the Great Depression, this was no hyperbole: the failure of the auto companies could endanger the economy in ways that were almost too frightening to contemplate.
The President arrived a few minutes late (Tiger was playing a particularly crucial hole), dressed in khakis and a black zippered jacket. I was not surprised that he was wearing casual clothes—I had on khakis myself. Since President Obama's arrival in the White House, shirtsleeves had become the Oval Office norm, and on weekends almost anything went—even T-shirts and jeans worn by unshaven, sockless men.
While his dress was informal, the President's mood was resolute. He had the air of a man in the business of calmly executing his decisions, not second-guessing them. After he'd chatted briefly with Reggie about the golf match, we followed him into the Oval Office, where he sat behind his desk, bare but for a folder of talking points for his calls.
Katie dialed him first into a conference line on which four lawmakers awaited: Michigan's two senators and two of its congressmen. Delegations from our task force had been meeting regularly with them—tense, often testy sessions in which we were lectured about the importance of helping this critical industry.
We clustered around a phone across the room from the President's desk, by the armchair in front of the fireplace where he sat during meetings. Katie had activated the phone's speaker so we would all be able to listen in, but it barely functioned—probably installed by a "well-connected government contractor," the President joked.
He worked through his talking points, fluidly detailing the next day's announcements. Then he paused to let the legislators speak. John Dingell, the longest-serving member of the House of Representatives in history, was gracious and statesmanlike. The others were audibly on edge, although considerably more polite and restrained in conversation with the President than they had been in their meetings with us.
Congressman Sander Levin seemed to interpret the President's allusions to bankruptcy for GM and Chrysler as just a negotiating tactic. "I understand that you have to refer to bankruptcy to get people to the table," he began.
The President interrupted in a measured tone: "I don't want you to leave with that impression. I'm telling you that because it's a real possibility."
At this, a chorus of anxious voices crackled through the speaker. Senator Debbie Stabenow urged that if the President was going to send such a tough message, he ought to couple it with a strong statement of support for the auto industry. Senator Levin beseeched him not to use a broad brush in criticizing the companies and to acknowledge the progress that they had made.
The President listened carefully. When he brought the call to a close after about thirty minutes, he asked Larry to take another look at the speech. By the following morning we'd responded by sanding down the criticism of the companies and adding the "Cash for Clunkers" program to bolster car sales.
The next call was to Governor Jennifer Granholm of Michigan. I'd gotten to know her as an energetic, dynamic candidate during her 2006 campaign, but Michigan was suffering the nation's highest unemployment rate, and in our more recent conversations she'd seemed beaten down and demoralized. Now, as she listened to the President outline his plans, her spirits seemed to fall further and her voice barely rose above a whisper.
"I hope you know what you're doing," she said softly.
During the final call, Ron Gettelfinger, head of the United Auto Workers, who had been defiant the previous autumn when Detroit first asked for federal help, was low-key and respectful now. This augured well for the tough discussions we knew we needed to have with him.
When his calls were completed, the President walked out of the Oval Office and back to the small TV, to learn that Tiger had hit a birdie putt on the eighteenth hole to win. Tiger's day may have ended, but for the task force, a night of work was just beginning.