The situation was dire on Columbus Day 2008, when General Motors’ Rick Waggoner revealed the bleeding company faced a potential shutdown. Rattner, tapped for his experience on Wall Street and within a political context, said he approached the situation as a private-equity exercise and saw his team as the custodian of government money.
Referring repeatedly to his new book, Overhaul, he said the team had to determine whether the companies were viable and had “backable” management, and faced a race against time to get both companies through a Section 363 sale. While the results were controversial to many in our industry, he emphasized that the plan withstood judicial scrutiny all the way to the U.S. Supreme Court,
Moreover, the U.S. government stands to receive $72 billion of its $82 billion investment in GM and Chrysler. The alternative would have been far worse than a $10 billion loss; if the companies collapsed, millions would become unemployed — in an instant.
Though the economy remains sluggish, the companies are on the road to health. GM’s structural costs are $23 billion, compared to $33 billion two years ago, and the company earned a $4.7 billion profit in 2010, compared to a $31 billion loss in 2008, he said.
Rattner said the experience drove home the role of “shared sacrifice’’ in a crisis, the importance of TARP funds — a mechanism that allowed government funds to be deployed without the blessing of Congress — and a good management team. He referred to Ford’s decision to install a new CEO, Alan Mulally, and “hock everything” to raise funds to ride through the recession without government help. Rattner’s takeaway?
“The jockey is as important as the horse.”
