WASHINGTON — Shockingly poor financial management at General Motors and Chrysler weakened their case for a federal bailout, but officials feared letting them collapse, the former head of a government auto task force said Wednesday.
In a first-person account posted on Fortune magazine's Web site and in a Brookings Institution speech, Steven Rattner said he was alarmed by the "stunningly poor management" at the Detroit companies and said GM had "perhaps the weakest finance operation any of us had ever seen in a major company."
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 described his six-month stint leading the Obama administration's auto task force, which pushed GM and Chrysler into quick bankruptcies over the summer with the help of billions of dollars in federal aid. The task force won concessions from the union, suppliers, bondholders and dealers, and the U.S. government now owns nearly 61 percent of GM and 8 percent of Chrysler.
Despite his initial assessment of GM and Chrysler as they stood before their bankruptcies, Rattner said he remains 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. "We believe that both of these companies are viable and we believe they both can earn good returns for their shareholders." Rattner cautioned that "it will probably take time for the government to get out" of its stakes in the automakers.
Rattner said at the National Press Club that he, along with Treasury Secretary Tim Geithner and White House economic adviser Larry Summers, "hated the idea of the U.S. government owning equity in these companies" but they concluded the government needed to protect taxpayers.
Rattner said the loss of the companies could have severely harmed the economy, costing "more than a million jobs in the short run."