US: "Stunningly poor" GM management shocked restructuring chief
Former Wall Street insider Steven Rattner, recruited by the Obama administration to restructure GM and Chrysler, despite no government or automaking experience, has said he was "shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company".
In a lengthy interview with Forbes magazine, Rattner, who left the administration in July, said "everyone knew Detroit's reputation for insular, slow-moving cultures".
According to Forbes, Rattner, who led the group that did the hands-on restructuring work, believed the decision to intervene in the iconic Detroit companies represented not "creeping socialism," as some feared, but a critical part of the effort to prevent economic collapse.
"For example," Rattner told Forbes, "under the previous administration's loan agreements, Treasury was to approve every GM transaction of more than US$100m that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures."
He said the "cultural deficiencies were equally stunning".
"At GM's Renaissance Centre headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).
"In my relatively few interactions with chairman and CEO Rick Wagoner, I found him to be likeable, dedicated, and generally knowledgeable. But Rick set a tone of 'friendly arrogance' that seemed to permeate the organisation," Rattner told Forbes.
"Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW."
He said it "seemed completely obvious" to us that any management team that had burned through $21bn of cash in a year and another $13bn in the first quarter of 2009 could not be allowed to continue.
"Equally important, GM's February viability plan was more 'business as usual' and not the aggressive new approach that we felt was essential."
Rattner said that, after talking to Wagoner and his deputy Fritz Henderson, he felt that the latter "conveyed more energy and openness to change". Treasury also considered whether GM would be better off replacing Wagoner with Henderson or bringing in an outsider, as Ford did when it recruited Boeing executive Alan Mulally.
"While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil," Rattner said.
Turning to the board which Rattner said "had been utterly docile in the face of mounting evidence of looming disaster", it was decided to recommend a package that would include replacing Wagoner with Henderson as interim CEO, changing at least half of the board, and making an outside director chairman.