The Story of the Auto Bailout, Told by the Man Who Orchestrated It

Overhaul is an insider’s account of the auto industry bailout begun under former President Bush and completed on the Obama administration’s watch. It is a story told by the one and only man who can give such an insider’s view: Steven Rattner, President Obama’s “car czar.” In fact “car czar” was never officially Rattner’s title, and readers will discover he is not very fond of this media-induced nomenclature.

Rattner is a respectable Wall Street economist and a former New York Times financial reporter. I believe his journalism background is what allows him to take the complex inner workings of a one-of-a-kind crisis and share it in a format that is understandable to most readers. Overhaul definitely requires careful reading, and even re-reading in some spots, but it’s easy to get a grasp on the financial instruments, deal making, and other facets of the auto bailout.

Being a financial guru from the private sector, Rattner is quickly blindsided by the corporate culture of the U.S. government. The buildings are dated, dingy even. Technology and audio/visual equipment are often scarce. Just getting clearance to work in government cost Rattner a huge fortune, not to mention reams of paperwork. Entrance into public service is, inevitably, followed by the press’ ruthless reporting and criticism of Rattner’s every move thereafter.

Unyielding collective bargainers, feisty personalities, big-mouthed politicians, and inept corporate executives are just a few additional challenges Team Auto and Rattner are up against. Tight deadlines and dwindling corporate bank accounts add to the urgency and lead to late nights, weekends, and holidays of work for the task force. All the while, they toe a very fine line of avoiding the appearance of federal takeover of private industry while using government money to save private enterprise. “Government Motors” is not a term Rattner finds particularly flattering.

The story of the auto bailout is certainly a gripping one, but it is made even more so when one considers the shockwaves failure of GM and/or Chrysler could have sent through the already-damaged U.S. economy.

While Rattner gives fair treatment to many of the backroom dealings and deliberations that he and his team faced, perhaps none stuck with me more than just how close they were to letting Chrysler go. “I spent many hours revisiting our toughest decision, to save Chrysler. The company was moribund; under almost any other economic circumstances, I would have…let it go,” tells Rattner in his epilogue. I find that interesting as I personally consider Chrysler a company who's lost its brand image and creates brand confusion for consumers. I could fill another blog sharing those opinions.

Rattner concludes his insider account with some personal reflection on government and its role in a free-market society. He says the only reason Team Auto was able to achieve a largely successful bankruptcy and bailout for two of the Big Three was due to the “czar-like” status that allowed them to steer clear of Congress. Rattner spares no punches as he lambastes Congress for its gridlock, endless meetings, and lack of accomplishing work of value. He believes the federal government of today is far from what the Founding Fathers envisioned. If nothing else, his summary poses some food for thought.

Being a Buffalo-based blog, I need to mention that we also get a reference in the epilogue. On page 311, while discussing economic theory, Rattner describes creative destruction as being the “formula for extinction for Detroit and Buffalo and many other hard-hit cities.” Basically, while municipalities like New York City have reinvented themselves as their economies shifted away from manufacturing, Rattner notes that others have fallen into a downward spiral of urban decay.  Rattner argues that this is caused by trying to preserve a former economy and way of life. Even if it’s not exactly positive, hey, there’s still always a Buffalo connection.

A few other thoughtful touches Rattner includes are a table listing how the billions of auto bailout money were disbursed and a character guide. In books with a large cast coming and going, I’ve mentioned before how useful a quick-reference guide of names and titles would be. Placed at the beginning of the book, I found myself using this tool often.

Overhaul just hit bookshelves this month and therefore is extremely up to date. Progress is being made in the auto industry with GM’s initial IPO and rebounding sales of Chrysler products. GM has launched a TV spot that thanks American taxpayers for their assistance, acknowledging that “We all fall down,” and, “Thank you for helping us get back up.” However, the story of whether or not GM and Chrysler will maintain competitiveness and profitability is a chapter that remains to be written.

That said, Overhaul is complicated at times, but otherwise a fascinating story with a colorful cast of players facing an never-before-seen challenge, and ultimately, achieving success.

Cashing in on Clunkers or Crushing Car Makers?

Congress has approved the “Cash for Clunkers” incentive, potentially doling out one-billion more taxpayer dollars. I can only describe this bill as being pure-Obama in nature. It’s supposed to help restart the economy. It’ll supposedly reduce inventories of older, more polluting used cars. And it may help domestic automakers, of which O’s administration is and/or will be a major stakeholder in two out of three.

In today's Buffalo News, an article announcing Congress' green light of the prgoram also included hopeful talk that this bill could help bankrupt Chrysler and GM start moving new cars onto the streets. And don’t forget the “green” economic “bright side” to this program.

Trouble is, as of the U.S. Department of Energy’s 2009 Fuel Economy Leaders guide, domestic automakers topping any class in fuel economy is rare. Most sedans, two-seaters, and small pickups are dominated by foreign makes. Some are Hondas and Toyotas, while others are Hyundais and Volkswagens.

The only classes where domestic automakers lead are in heavy-duty pickups, SUVs, and cargo vans. No wonder, as these types of vehicles have long been Detroit’s bread and butter. While models like Toyota Tundra and Nissan Titan attempt to fill in the gaps, it seems any die-hard truck lover is going to choose either a Ford, Chevy, or Dodge. Arguing about which of the three is best is a whole different animal.

So it’s funny then: Obama wants to legislate tougher CAFÉ standards and fuel economy requirements. He’s all in favor of Fiat and Chrysler’s marriage, since this will supposedly bring "Euro micro car" technology to the U.S.

Obama’s mandates, if passed, will achieve the following:

• Domestic automakers will be deprived of their highest-profit trucks, SUVs, and heavy-duty vehicles


• The Big Three will be strong-armed into building dinky, fuel efficient cars that most Americans probably won’t take kindly to


• One-billion taxpayer dollars are going to go toward funding a program encouraging cars most people don't want to drive, while destroying the bigger vehicles that have long kept the American automakers alive...

There seems to be a lot of irony in all this. Don’t even get me started on other complications, like who (the taxpayers, of course) is ultimately going to pay for this “Cash for Clunkers” incentive.

Ramblings on the Auto Industry

I’m newly re-subscribed to Car and Driver Magazine after no less than a five-year hiatus. Call it lack of time. Call it lack of funds. Whatever my reason, as much as I enjoy the fine automotive journalism contained between those hallowed covers, I only took this offer because it was a freebie. (I’m good at getting those it seems…and that’s just car magazines…you should see what I save on my car insurance!) Ok, so anyway, in the June 2009 C&D, the last page features “This Car and Driver,” and contains a brief interview with one of California’s privileged testers of the Honda Clarity.

The Clarity is Honda’s first limited-production hydrogen-powered sedan. It reminds me of a Civic, or perhaps the new Insight (hybrid). To be one of Honda’s guinea pigs, the driver ponies up $600 a month / 36 months on a no-negotiations lease.

It’s encouraging to hear this leasee likes his vehicle and has positive things to say about it thus far. I think hydrogen may very well be the fuel of the future, as opposed to faux-green cars called hybrids (see what I have to say about them here) that don't eliminate petrol entirely. Does hydrogen have safety concerns? Sure. Are there bugs to be ironed out? Plenty. But Honda’s elemental insight into this pilot project shows that the company is looking toward cars of the future.

Ten years ago I remember reading about a Chrysler-developed hydrogen prototype in Automobile Magazine. What ever became of that? Perhaps if American auto companies had stayed more focused on projects like that one, or GM’s EV1, they would be ahead of the game, instead of living on tax-payer funds. Rather than criticize Japanese competition, perhaps Detroit needs to learn from the Japanese model: Anticipating the cars of the future and preparing accordingly in the present.

Anyway, to be fair, GM is developing a hydrogen Chevy Equinox, first seen by me at the Buffalo Auto Show this past February: