Stunned by auto finances, task-force leader optimistic

WASHINGTON — The former head of the Obama administration's auto task force expressed optimism Wednesday that General Motors and Chrysler could rebound and help taxpayers recoup some of their multibillion-dollar investment in the Detroit auto companies.

Steven Rattner, in a speech sponsored by the Brookings Institution, said his auto team was stunned by the dire straits of GM and Chrysler when they delved into the companies' financial books but remained confident that the overhaul of the automakers could eventually restore them to profitability.

"I think we gave them every tool, not only that we could, but every tool that they need," Rattner said at the National Press Club. "We believe that both of these companies are viable and we believe they both can earn good returns for their shareholders."

"Be patient"

Rattner cautioned that "it will probably take time for the government to get out" of its nearly 61 percent stake of GM and 8 percent share of Chrysler. He said the task force studied similar cases and found that it took three to five years on average for a government to divest its holdings in private companies.

"No one should expect overnight turnarounds ... be patient," Rattner said. He later told reporters, "I don't believe the government will or should conduct a fire sale."

Earlier, in a first-person account posted on Fortune magazine's Web site, Rattner said he was alarmed by the "stunningly poor management" at the Detroit companies before the bailouts and painted a poor picture of GM's management. GM's board of directors was "utterly docile in the face of mounting evidence of a looming disaster" and former GM Chairman and Chief Executive Rick Wagoner set a tone of "friendly arrogance" that permeated the company, Rattner wrote.

Rattner led the auto task force as it pushed GM and Chrysler into quick bankruptcies last summer with the help of about $65 billion in federal aid, leaving the job in July. The task force won concessions from the union, suppliers, bondholders and dealers to restructure the companies.

Jobs at stake

Rattner said the loss of the companies could have severely harmed the economy, costing "more than a million jobs in the short run." He said their failure also would have dramatically deepened and prolonged the recession and would have pushed unemployment rates in several states "above 20 percent."

Rattner said the task force determined that Chrysler could not survive without a corporate partner, leading it to turn to Italy's Fiat Group SpA. Fiat took control of Chrysler after it emerged from bankruptcy protection in June and received a 20 percent stake in the company, with the opportunity to take on 35 percent.

As for GM, Rattner described the administration's decision to seek Wagoner's resignation. "It seemed obvious that any CEO who had burned through $44 billion of cash in 15 months should not continue," Rattner said.