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Automotive News
October 21, 2009 - 10:46 am ET
UPDATED: 10/21/09 4:22 p.m. ET
WASHINGTON -- Former General Motors CEO Rick Wagoner and his aides were “sequestered” and “insular,” presided over a “lack of financial discipline” at the company and blamed everything but their own management for the company's demise, the former chief of the Obama administration's auto task force said.
In a speech today, Steven Rattner said Wagoner, who also was GM chairman, was subject to little oversight by the GM board, which was “utterly docile in the face of looming disaster.”
“At GM's Renaissance Center headquarters, the top brass was sequestered on the uppermost floor, behind locked and guarded glass doors,” Rattner told a National Press Club audience. “Executives housed on that floor had elevator cards that allowed them to descend directly to their private garage without mixing with lower-ranking colleagues.
“In that insular world, Chairman and CEO Rick Wagoner and his team appeared to believe that virtually all their problems resulted from some combination of the financial crisis, oil prices, the yen-dollar exchange rate and the UAW,” Rattner said.
He said that virtually all senior GM executives “came up through the ranks.”
A ‘decent' guy
At the same time, Rattner added, Wagoner is “a decent, honorable, hard-working, intelligent, well-meaning guy.”
In a first-person account today on Fortune magazine's Web site, Rattner also said Wagoner set a tone of “friendly arrogance” that pervaded the company. GM had “perhaps the weakest finance operation any of us had ever seen in a major company,” he said.
Rattner's blunt public comments about Wagoner's management and management style are a departure from what Obama administration officials have said about the former GM executive. When Wagoner stepped down in March under pressure from the administration, officials were much more guarded in their remarks.
Wagoner did not immediately respond to an e-mail today asking for his comment. GM spokesman Tom Wilkinson said, “From what we understand, he is not responding.”
Wagoner was CEO from June 2000 to March 2009 and chairman from May 2003 to March 2009.
Responding to criticism
Rattner, an investment banker who headed the Obama task force from February to July, also defended the administration's role in securing Wagoner's departure.
"It seemed obvious that any CEO who had burned through $44 billion of cash in 15 months should not continue,” he said.
Critics have said the government was heavy-handed.
At the time of Wagoner's ouster, Rep. Thaddeus McCotter, R-Mich., said the executive was a victim of a double standard.
"Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date,” McCotter said. “Mr. Wagoner has honorably resigned for the sake of his company's working families.”
Sen. Bob Corker, R-Tenn., also criticized the administration over Wagoner's firing.
“They had to look like they were doing something,” Corker said at the time. “And then now, in essence, they have taken over these companies.”
Rattner said Wagoner had also cautioned him against hiring an outsider at GM to replace him, citing the example of Ford Motor Co.
"'Alan Mulally called me with questions every day for two weeks after he got to Ford,'" Rattner quoted Wagoner as saying.
Wagoner formally retired in August with a package worth $8.6 million.
Today at the National Press Club, Rattner said GM's finances were something he felt particularly qualified to assess.
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FORTUNE MAGAZINE: Steven Rattner: Why we had to get rid of GM's CEO
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Never heard ‘shareholder value'
“We saw no indication of the finance staff pushing back on the operating divisions to achieve better results, as is customary,” he said. “Analyses seemed engineered to support preordained conclusions. Symbolically, we never heard the words ‘shareholder value.' ”
He cited as an example a task force request for GM financial results that “took forever.”
In addition, GM “never really got anything” from its spinoff of Delphi Corp., the large parts manufacturer that was in bankruptcy, Rattner said. The spinoff led to “no fundamental restructuring,” he added.
Rattner also was critical of Chrysler's management, but less pointed in his remarks.
The company was “larded up with debt, hollowed out by years of mismanagement and operating as just a North American player,” he said.
He added that Chrysler didn't have a single car that was recommended by Consumer Reports magazine.
In his Fortune article, Rattner said that under the private equity firm Cerberus Capital Management, Chrysler “never had a chance.”
Rattner also defended the administration's injection of working capital into GM and Chrysler and its shepherding of the companies through bankruptcy.
“With financial markets still frozen, both would have unquestionably run out of cash quickly, slid into bankruptcy, closed their doors and liquidated,” he said.
“That would have meant the elimination of more than two-thirds of American-owned auto manufacturing capability, cost more than a million jobs in the short run, dramatically deepened and prolonged the nationwide recession and pushed unemployment rates in several states above 20 percent.”
Reuters contributed to this report
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