Professor Elam

John Crawley, Reuters  Published: Thursday, October 22, 2009

The biggest question in the turnaround of General Motors Co. is how it can overcome decades of insular management, the former leader of the Obama administration's autos task force said yesterday.

"A successful recovery is far from assured," Steven Rattner said about GM and Chrysler Group LLC, the two auto-makers the task force pushed into bankruptcy this year to prevent their collapse. But he sounded an optimistic note, saying the two are viable and have "every tool they need" to succeed.

Mr. Rattner also said the Obama administration was deeply divided over whether to fund Chrysler's restructuring in bankruptcy and whether the automaker could survive to repay the investment.

The investment banker, who headed the Obama administration's autos task force until July, also said he had been shocked by the "stunningly poor management" at both GM and Chrysler.

"Everyone knew Detroit's reputation for insular, slow-moving cultures. Even by that low standard, I 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," Mr. Rattner said in an account of his stint in the administration, published by Fortune magazine yesterday.

Mr. Rattner said the decision to offer Chrysler US$12-billion in emergency financing to restructure under the management control of Fiat SpA had been "a close call," adding that the administration was ultimately swayed by the view that allowing the automaker to liquidate would cost 300,000 jobs.

"The group was torn," Mr. Rattner said, noting that at one point key members of the autos task force had been split 4-to-4 on whether to offer Chrysler financing.

Mr. Rattner forced the resignation of former GM CEO Rick Wagoner.

"It seemed completely obvious to us that any management team that had burned through [US]$21-billion of cash in a year and another [US]$13-billion in the first quarter of 2009 could not be allowed to continue," Mr. Rattner said.