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Auto bailouts chiseled out of conflicts and tension

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Auto bailouts chiseled out of conflicts and tension

Rattner details struggles between execs, union, White House staff

Christine Tierney, Alisa Priddle and Christina Rogers / The Detroit News

Few people got a closer view of the frantic, messy $85 billion government bailout of General Motors and Chrysler than presidential auto adviser Steve Rattner. In a riveting account, he provides revealing portraits of the key players who labored under pressure-cooker intensity to save the industry and hundreds of thousands of jobs.

Rattner describes a temperamental Fiat SpA CEO Sergio Marchionne, a disillusioned Ron Gettelfinger, president of the United Auto Workers union, and a deeply fractured GM board, split between holdovers from the old GM and new appointees.

While much of GM's collapse into bankruptcy and tumultuous rebirth has been chronicled, Rattner sheds new light on the struggle to rescue Chrysler.

Marchionne and the investment bank J.P. Morgan Chase would prove to be "among our biggest headaches in the race to save the company," he writes in "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry." The 320-page memoir will be published in mid-October. A manuscript was made available to The Detroit News by publisher Houghton Mifflin Harcourt.

In April 2009, during the final stages of Marchionne's negotiations over Chrysler with the auto task force, "Dottore Jekyll became Signore Hyde. Yes, there was a charmer in Sergio. But there was also someone else," Rattner writes.

At one meeting, when his right-hand man Alfredo Altavilla reminded him of a term of the deal that had been agreed upon, Marchionne erupted. "The tirade got so bad that Ron (Bloom) and others quietly got up and left."

But later on, Rattner described Marchionne's legendary work ethic and thoughtful remarks that Marchionne addressed to Chrysler employees.

While tensions between politicians and auto executives were evident at the time, in late 2008 and early 2009, Rattner describes the conflicts behind closed doors that pitted bankers, dealers and even union leaders against the new Democratic administration.

Bondholders were stunned when they realized they'd lose out in Chrysler's restructuring under bankruptcy, while a UAW trustee would emerge as the majority shareholder.

"Jimmy became apoplectic," Rattner writes, referring to the bondholders' representative, J.P. Morgan Chase Vice Chairman James Bainbridge Lee Jr.

"He demanded to know why the UAW should get any consideration, since it was well below the banks on the priority list of who would get paid in a bankruptcy. Ron (Bloom) responded to that, bluntly telling him, 'I need workers to make cars, but I don't need lenders.' "

Bloom, a former union adviser, was a key task force member.

Gettelfinger felt manipulated and wouldn't shake hands on the deal with Andrew Horrocks, then a managing director with investment bank UBS, one of Fiat's advisers.

Chrysler officials declined to comment, saying they hadn't seen the book. GM also did not comment.

Looking at GM, Rattner, a former New York Times reporter and investment banker, said there was no doubt in his mind that Chairman and CEO Rick Wagoner had to go.

"It wasn't personal. It was business," he wrote. "We did not know of another industrial company in history that had burned through so much cash as GM had on his watch."

Then-GM President Fritz Henderson was the obvious replacement, Rattner said, describing him as "smart, energetic, down-to-earth, and more open to change" than Wagoner.

Henderson, deeply loyal to Wagoner, was stunned by the turn of events. He later spoke to Rattner about his flight back from Washington to Detroit with his onetime boss and mentor -- "a somewhat surreal journey during which he and Rick sat next to each other, one row away from a well-known automotive journalist. They didn't exchange a single word about the day's events," Rattner writes. "He and Fritz would never have a conversation about what had transpired."

Of all the casualties of the auto company bailouts, bankruptcies and reconstitutions, Rattner seems conflicted as he relates how Henderson was ousted from GM after just 247 days as CEO.

"He was not only a GM lifer but also the son of a GM lifer. ... He was a Detroit auto guy through and through -- not exactly fresh blood for a company that needed sweeping change. Yet there was much about him to like," said Rattner.

From the outset, task force members and GM directors openly discussed the odds on his survival. Henderson is portrayed as being over his head in this ruthless environment. In addition, his loyalty to CFO Ray Young -- who was considered out of his depth by Rattner and some board members -- cost him dearly.

At Henderson's first board meeting under new GM Chairman Ed Whitacre Jr., Henderson didn't outline a vision or strategy for the automaker. After a quick greeting, he turned over the floor to Young.

Former Coca-Cola Chairman Neville Isdell pulled Henderson aside after the meeting and told him, "You missed your moment," according to Rattner.

Henderson resigned in December, and Whitacre took over as CEO, as well as chairman.

Rattner praises the former AT&T chief for his leadership. But he was puzzled by Whitacre's sudden decision last month to leave before the upcoming initial public offering that will make the automaker a publicly traded company again.

"He had promised to see GM through its initial public offering, which the directors took to mean that he would stay at least until 2011," Rattner writes. "I shared the board's disappointment with Whitacre."

But he believes Daniel Akerson, a partner from the large Washington, D.C., private equity firm Carlyle Group, is the right replacement. "Akerson and Whitacre have the same kind of toughness and decisiveness."

Besides Akerson, GM's board considered two other directors to replace Whitacre: Patricia Russo, former CEO of Alcatel-Lucent, and Steve Girsky, GM vice chairman and a former Wall Street analyst.

"Girsky was not seen as a plausible replacement -- no real management experience," he wrote. "And while Russo had done well as GM's lead director, her past performances as a chief executive had been rocky. That left Akerson. In my view, he was the right choice."

But Rattner regrets Akerson was appointed chairman of GM as well, effective Jan. 1.

"Nothing has occurred to change my view that 'best practices' in corporate governance means separating the chairman and chief executive roles," he wrote. "If ever a company needed to hew firmly to best practices in corporate governance, it is the one that owes its existence to the support and goodwill of the American taxpayer."

From The Detroit News: http://detnews.com/article/20100904/AUTO01/9040347/1148/auto01/Auto-bailouts-chiseled-out-of-conflicts-and-tension#ixzz0ylTdpsPn

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