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Old 10-21-2009, 01:17 PM   #1
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Default U.S. was 'shocked' by poor management at GM, Rattner says

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DETROIT (Reuters) -- The White House auto task force chief who led the rescue of Chrysler and General Motors said he was astounded by the poor quality of management at the automakers.

"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,” said Steve Rattner, the investment banker who headed the Obama administration's auto task force until July.
GM had “perhaps the weakest finance operation any of us had ever seen in a major company," Rattner said in an account of his stint in the administration, published by Fortune magazine today.

The task force was also deeply divided over whether to fund Chrysler's restructuring in bankruptcy and whether the automaker could survive to repay the investment.
Rattner said the decision to offer Chrysler $12 billion in emergency financing to restructure under the management control of Fiat S.p.A. had been "a close call." He added that the administration was ultimately swayed by the view that allowing the automaker to liquidate would cost 300,000 jobs.

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

Odds of saving Chrysler
Rattner said when pressed by White House economic adviser Larry Summers, he had estimated the odds of Chrysler surviving for two years at 51 percent.

He said the automaker under former owner Cerberus Capital Management "never had a chance" because of its high debt and "years of mismanagement."

White House economic aide Austan Goolsbee, meanwhile, had "led the charge against Chrysler," arguing that allowing the automaker to fail could bolster GM's chances of success.
The revelations from Rattner on the closed-door deliberations on the autos bailouts come at a time when GM is struggling to win back American consumers and Fiat CEO Sergio Marchionne is readying a five-year turnaround plan for Chrysler.

Rattner forced the resignation of former GM CEO Rick Wagoner and provided a first-hand account of his March ouster in his article.

Wagoner: ‘Friendly arrogance'
Rattner said he found Wagoner "to be likable, dedicated and generally knowledgeable," but he also said the former GM CEO had "set a tone of friendly arrogance that seemed to permeate the organization."

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

Rattner said the automaker's current chief, Fritz Henderson, had been "enthusiastic" about his promotion and had asked not to be tagged as an "interim" choice.

Wagoner, he said, also supported the selection of Henderson as his successor and questioned at one point whether Rattner also intended to fire UAW President Ron Gettelfinger, a political ally of the Obama administration.

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, who retired in August with a package worth $8.6 million, has not commented on the meeting with Rattner or his ouster.
http://www.autonews.com/article/2009...910219993/1197
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Old 10-21-2009, 01:19 PM   #2
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Default Steven Rattner: Why we had to get rid of GM's CEO


The man who led the auto bailout tells about his shock at the state of the carmaker's finances and management



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Without any experience in automaking or government, Steven Rattner left his Wall Street perch to wade into the largest restructuring in American history. The scale and speed of the rescue raised many questions, inspiring Rattner to write this account of a defining moment in capitalism. Rattner, who led the group that did the hands-on work, believes passionately that the decision to intervene represented not "creeping socialism," as some feared, but a critical part of the effort to prevent economic collapse. In an excerpt from this Fortune exclusive, Rattner gives a behind-the- scenes look at the ouster of GM's Rick Wagoner:

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.

For example, under the previous administration's loan agreements, Treasury was to approve every GM transaction of more than $100 million that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures.

The cultural deficiencies were equally stunning. At GM's Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).

In my relatively few interactions with chairman and CEO Rick Wagoner, I found him to be likable, dedicated, and generally knowledgeable. But Rick set a tone of "friendly arrogance" that seemed to permeate the organization.

Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW.

It seemed completely obvious to us that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue. Equally important, GM's February viability plan was more "business as usual" and not the aggressive new approach that we felt was essential.

In a mid-March meeting with Rick, I explored his feelings about his team and then tried to work the conversation around to himself. "I'm not planning to stay until I'm 65 but I think I've got at least a few years left in me," said Wagoner, 56. "But I told the last administration that if my leaving would be helpful to saving General Motors, I'm prepared to do it." He added that neither he nor his board thought that was a good idea.

I left my conversation with Rick at that. The next day, I met with Rick's deputy, Fritz Henderson. Another GM lifer (and son of a GM lifer), Fritz conveyed more energy and openness to change. The question for us was whether GM would be better off with Fritz or with an outsider, as Ford (F, Fortune 500) had done in bringing in Boeing executive Alan Mulally. While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil.

Meanwhile, if ever a board of directors needed shuffling, it was GM's, which had been utterly docile in the face of mounting evidence of looming disaster. We decided to recommend to Tim, Larry, and ultimately the President a package that would include replacing Rick with Fritz as interim CEO, changing at least half of the board, and making an outside director chairman (which should be universal)
http://money.cnn.com/2009/10/21/auto...ion=2009102109
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Old 10-21-2009, 01:30 PM   #3
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"'Alan Mulally called me with questions every day for two weeks after he got to Ford,'" Rattner quoted Wagoner as saying."

I hope GM looks at this comment in a different light nowadays. Bringing in a new guy was the best thing Ford ever did.
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Old 10-21-2009, 06:25 PM   #4
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Mulally probably called him to find out what not to do at Ford.
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Old 10-21-2009, 08:26 PM   #5
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Ford made one smart move in their finances, otherwise, they'd be in the same mess as GM. And I'm sure they have a great deal of issues there too.
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Old 10-21-2009, 10:03 PM   #6
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Ford made one smart move in their finances, otherwise, they'd be in the same mess as GM. And I'm sure they have a great deal of issues there too.
That's more or less completely untrue. You think giving GM the same amount of money as Ford had back then would have made a difference? Ford has several orders of magnitude better management. Alan Mulally is one of the greatest modern executives that America has. Not only has he manage to make Ford do a complete 180 but BCA is slowly imploding without him. Ford has continued to invest in new products and focused on what consumers want. GM is still building the same old cars but is fixated on it's quixotic Volt quest and that's AFTER they restructured.
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Old 10-21-2009, 10:14 PM   #7
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That's more or less completely untrue. You think giving GM the same amount of money as Ford had back then would have made a difference? Ford has several orders of magnitude better management. Alan Mulally is one of the greatest modern executives that America has. Not only has he manage to make Ford do a complete 180 but BCA is slowly imploding without him. Ford has continued to invest in new products and focused on what consumers want. GM is still building the same old cars but is fixated on it's quixotic Volt quest and that's AFTER they restructured.
And that is all an opinion which I can say is completely untrue.

Boeing was sucking far before Mulally left. The problems they are having now were created under his watch.
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Old 10-21-2009, 10:33 PM   #8
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And that is all an opinion which I can say is completely untrue.

Boeing was sucking far before Mulally left. The problems they are having now were created under his watch.
Perhaps but an educated opinion. I've read a lot about Mulally being that I manage aerospace development programs for a living. I've implemented a lot of his methods and some of his style on my own programs and I can tell you first hand it's effective. I also work for a Boeing supplier so I speak with Boeing engineers and managers on a daily basis. For that matter my mentor is a former Boeing and Douglas engineer and there is clearly an earned respect for Mulally and his management. Most (all?) of them blame the current Boeing problems on poor management and lament that Mulally being passed over for CEO.

Also, the 777 was really Mulally's last airplane program. Obviously the 787 was started under his watch but the infighting and finger pointing mess that Boeing has become was after he left. I've never heard anyone even mention in his name in relation to the 787 except to say/wish he might come back to Boeing to clean it up.

Here's what Mulally has to say about financing at Ford...

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Most people who run big companies don't want to say that there was one seminal decision that changed the fortunes of the company. But I think the impression is that your decision to take the $23 billion dollars was the critical decision that Ford made. Is that a fair assumption?

It's an important one. [But] I would really highlight five fundamental decisions. I think one key thing about the financial decision was also the timing. And when I first arrived three years ago this month, the U.S. economy was starting to slow down. We hadn't gotten to a recession yet, but it was really slowing down, and the rest of the world was starting to slow down. And then when we came together around what needed to be done to create a viable, exciting, profitably growing Ford it really had four elements that had to be done. One is we decided to focus on the Ford brand. And Ford really was a house of brands at the time. And that's one strategy. We weren't leaning on that. The customer wants brand clarity and everybody wants to know why they're coming to work. A decision we took is that we wanted to focus on the Ford brand. It was 85 percent of the business. We had operations all around the world. We started to divest Jaguar, Aston Martin, Land Rover, Mazda, Volvo, and really focus on Ford. And that takes time and takes money.

The next thing we decided was that with this slowing down of the economy we had to restructure the business very quickly. And we were the first automobile company to actually take down the production of the current products to match this decreasing of fundamental demand because of the economy. That was a big decision. The car companies would tend to keep production up. They assumed the fixed costs were fixed, all of them. They would go for the incremental sale value. They would have to discount the vehicles and the dealers would discount the vehicles to sell them. The residual values would go down, and it would almost delay the economic recovery because you just have too much product out there. So we took a big decision to restructure the business. And that takes time and money to do that.

Then the next decision was that we wanted to accelerate the new products for Ford because in the United States we were always, for the last twenty years, known as a great SUV and truck company. But because of our cost structure we couldn't make cars in the United States and make them profitably. So we focused on cars outside the United States, and did very well. But we wanted to bring a full product line to the United States going forward because of our position that we thought our role was to deliver fuel efficient cars because energy would be more expensive going forward. We wanted to have a full product line from Ford: small, medium, and large.

And, the other key decision was that every new vehicle from Ford had to be best in class and quality. And best in fuel-efficiency, best in safety. And they will have really smart, neat design and neat features and be fun to drive. So you add all those things up, and that takes a financing plan. So that led us to "what does it take to finance this transformation"? I guess the backdrop of the economy slowing down. And so the most important thing we probably did, and I did at first was to make sure we had enough cushion and we raised enough money that we could [transform] Ford, and if it got worse we still had sufficient liquidity. So that led to the amount, and then of course at the time the credit markets were open, we had a great business case.

We had over 500 banks looking at our business plan and they're deciding whether they believe in you or not. We presented the case and we raised $23.5 billion. Now in hindsight, it looks brilliant. But really, I guess it is smart business, but looking back what we were really trying to do was to make sure we had a financing plan so we could continue this transformation of Ford. And that's what's being played out right now. We have the liquidity. We are restructured now. We're competitive. We have a new agreement with the UAW. We're bringing the new products on now; we didn't stop on the investment. And even with that full investment, we now are on a road to profitability in 2011, but we're there with all the products that people really do want.
http://www.newsweek.com/id/215551
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Old 10-21-2009, 11:28 PM   #9
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I really do want to see Ford return to profitability in 2011. I want an American automaker that we (the US) can be proud of and one that makes world class products. I feel now like our automotive industry is a joke.
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Old 10-22-2009, 06:38 AM   #10
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Also, the 777 was really Mulally's last airplane program. Obviously the 787 was started under his watch but the infighting and finger pointing mess that Boeing has become was after he left. I've never heard anyone even mention in his name in relation to the 787 except to say/wish he might come back to Boeing to clean it up.
Personally I call it nostalgia. The 787 is just far more ambitious and complicated than the 777. The 777 was not trying to do something that was so radical. He probably is a good executive, but I am saying that when you do something so technically ambitious it isn't surprising there are problems regardless of whether management is doing a good job.
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Old 10-22-2009, 10:40 AM   #11
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Personally I call it nostalgia. The 787 is just far more ambitious and complicated than the 777. The 777 was not trying to do something that was so radical. He probably is a good executive, but I am saying that when you do something so technically ambitious it isn't surprising there are problems regardless of whether management is doing a good job.
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Old 10-22-2009, 11:20 AM   #12
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the A380 was an embarrassment that I thought could never be topped ...

~ then Boeing comes out with a gutless 787 at a "ceremony" & years later the thing still can't fly! Shame on Boeing for not learning a darn thing from Airbus & instead making themselves out to be even more the fools

If Mulally’s responsible for some of this or not I do not know, but one thing I do know:
Boeing isn’t the Boeing it use to be
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Old 10-22-2009, 11:45 AM   #13
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Thats harsh, you can bet when Boeing releases that plane it will be top notch. They make the best commercial planes in the world. Its better to be late and deliver a great product than rush one to market before its ready.
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Old 10-22-2009, 11:51 AM   #14
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Funny, this is how I feel about our current gov. Only we can print out money and not tell anyone.
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Old 10-22-2009, 12:05 PM   #15
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Thats harsh, you can bet when Boeing releases that plane it will be top notch. They make the best commercial planes in the world. Its better to be late and deliver a great product than rush one to market before its ready.
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Old 10-22-2009, 12:28 PM   #16
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bingo.
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Old 10-22-2009, 12:58 PM   #17
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Personally I call it nostalgia. The 787 is just far more ambitious and complicated than the 777. The 777 was not trying to do something that was so radical. He probably is a good executive, but I am saying that when you do something so technically ambitious it isn't surprising there are problems regardless of whether management is doing a good job.
I thought the 787 was a safety move compared to their other option of taking a crack at a viable SST that would really change the game.
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Old 10-22-2009, 06:53 PM   #18
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i was more shocked when i saw the commercials for the "aztec" turd

what the hell were these idiots thinking????????


don't they know SUV's are "outgoing"?


this pos certainly wasn't because of the assembly line workers


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Old 10-23-2009, 06:43 AM   #19
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I thought the 787 was a safety move compared to their other option of taking a crack at a viable SST that would really change the game.
Actually the 787 is pretty darn radical. And all sorts of other industries will benefit from boeing's pioneering work on it in the end. An SST would be nice perhaps, but the only one that existed folded. And just making an even bigger jet isn't that appealing either.
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Old 10-23-2009, 06:05 PM   #20
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i was more shocked when i saw the commercials for the "aztec" turd
what the hell were these idiots thinking????????
don't they know SUV's are "outgoing"?
this pos certainly wasn't because of the assembly line workers
It isn't bad in my opinion and has been very well reviewed by the media, unlike its predecessor. I have no idea what "outgoing" means, but small SUVs are still selling very well. Check the sales volumes for the CR-V, RAV 4 and Escape. There's not much from GM that I like, but it's a good thing when one of its vehicles is mentioned as competing with the best in class and this one is.

I'm sure more about GM will come out and it will be a case study for graduate students in business schools around the country. Some of the things I've read defy common sense and the guy that owns the local Stop N Go would have known better. I liken it to inbreeding. Without some diversity of back ground and experience, some new blood, the business is doomed to make the same mistakes over and over and over again and mediocrity becomes acceptable.
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