Power Breakfast with Former Car Czar Steve RattnerBy Doron Levin October 4, 2010
Steve Rattner, the former New York Times reporter who struck it rich on Wall Street, wouldn't have been anyone's first guess as the individual to become overseer for the latest overhaul of the once-mighty U.S. automobile industry.
Yet politics and finance - and perhaps fate - brought Rattner to center stage in early 2009 when the administration of President Barack Obama sought a leader for the restructuring of then-General Motors Corp. and Chrysler LLC, both of which were teetering on the brink of failure. Rattner, an early supporter of Hillary Clinton for president rather than Obama, got the nod.
Under his guidance and the auspices of the U.S. Treasury, the 15-member Automotive Task Force guided the two automakers through quick bankruptcies, in the process firing Rick Wagoner as GM's CEO and handing Chrysler to Fiat SpA and its CEO, Sergio Marchionne.
Rattner's aptly named book about fixing both domestic automakers, "Overhaul," has been arriving at bookstores to generally positive reviews. Edmunds.com CEO Jeremy Anwyl gives his take on the book on his "Just to Clarify" blog.
Rattner agreed to meet us for a "Power Breakfast" at E.A.T., a Madison Avenue delicatessen on the Upper East Side of Manhattan, around the corner from where he lives. E.A.T. draws its clientele from the celebrity-studded neighborhood, a fact underscored when former Washington Post journalist Carl Bernstein sauntered over to our table to greet Rattner. Elliot Spitzer, the former New York attorney-general disgraced in a sex scandal "eats here a lot," he said.
Rattner ordered scrambled eggs with lox, and I an egg white spinach omelette and toast. When our waiter seemed to have forgotten us, an impatient Rattner got to his feet and asked for service, much as he might have demanded to know why a junior Treasury official hadn't produced the reports he needed.
Rattner apologized for several last-minute changes about our breakfast location, explaining that he originally had been scheduled to appear on Fox TV following our meeting and decided to cancel the appearance at the last minute, a bit uneasy about what the interviewer was planning to ask.
"I'm not sure that a book like mine will sell a copy on Fox. The Obama administration actually accomplished something'' with the industry's restructuring, he submits, adding, "I'm not sure that's what the Fox audience wants to hear. They want a book that tells them how terrible it was, not how wonderful it was."
Rattner has been wading through interview after interview to promote his book. He has been explaining why the Obama administration was correct in imposing tougher conditions on the automakers than those they imposed on themselves and why the U.S. was fortunate that the controversial Troubled Asset Relief Program funds had already been appropriated by Congress for bailout purposes, allowing the Task Force to avoid having to plead for the money.
On the evening following our breakfast, Rattner was scheduled to appear on The Colbert Report. The show's host, comic Stephen Colbert, is renowned for making his guests look and sound foolish. "My goal is just to get out alive,'' Rattner said, who though he's golf with Obama admitted to being "terrified" facing Colbert.
When the Obama administration selected him to lead the Automotive Task Force, he was surprised, he said - but not because he had been an early supporter of Hillary Clinton's for the presidency. After all, lots of Clinton supporters and Clinton herself work for the president. "I wasn't an auto guy, I wasn't a manufacturing guy, I'm a financial guy,'' he said.
He does think "Hillary could run again, but certainly not against President Obama next time, not a chance in a billion that she would challenge him.'' In 2016, he said, "she will be young enough and certainly has the energy, the drive and the enthusiasm."
But he's not interested in more public service in Washington: "I've been there, done that. I had an unbelievable experience. I was fortunate that (Treasury secretary) Tim Geithner asked me to do a job that was actually doable. We were able to completely restructure these companies - and it's hard to imagine a job in Washington where it would be possible to feel this sense of accomplishment."
In his view "to accomplish anything in Washington you have to deal with Congress, and that's an exceedingly unpleasant job. As you know, Congress is on the verge of becoming completely dysfunctional. I think that's part of why Larry (Summers) is leaving'' as the administration's top economic adviser, he surmised.
On the teetering U.S. economy Rattner said, "there's so much economic illiteracy and confusion about what to do" in the face of weak growth and the possibility of deflation. I can't imagine that anyone would disagree with the notion that we need to maintain an expansionary fiscal and monetary policy, keeping interest rates low and willing to tolerate an unnaturally high rate of deficit for a while.''
The U.S. budget deficit "is a huge problem that has to be addressed, but I don't believe it can be addressed right now. We need a couple more years of stimulative economic policy and then we need to make some unbelievably tough choices about taxes versus spending and how we want to allocate our resources."
Rattner acknowledges that Americans have borrowed too much and must "repair" personal balance sheets. He says the fault lay with artificially inflated housing values, which caused people to think they were worth more than was reasonable, leading to too much spending and too little saving. But halting spending now, he said, could suppress economic growth and employment. As erudite as any graduate of Brown University should be, Rattner mentioned John Maynard Keynes's popularization of "the paradox of thrift," an economic principle that says when everyone saves, aggregate demand falls, thereby reducing aggregate savings: "Be careful what you wish for,'' he said. "We have to steer a middle course."
Rattner's wealth, reputed to be in nine figures, certainly seems to insulate him from financial worries, yet, "I'm sure my house is worth less than it was," he frets. "But I've been a prudent saver all along the way."
In addition to his Upper East Side residence, Rattner owns a farm in North Salem, New York, an hour's drive north of the city, where he rides horses, plays tennis, indulges in a bit of golf and relaxes with his wife and four children. His eldest, a daughter, just completed work on her first political campaign, on behalf of an unsuccessful Congressional aspirant. Twin children are sophomores in college, and the fourth is on a "gap year" program between high school and college in Uganda.
"I'm a terrible golfer," he conceded, but he joined a club so his children could learn to play. He says he's doesn't much enjoy the game, but responded to encouragement from New York city Mayor Michael Bloomberg, who also belongs to his club. Rattner said he met Bloomberg, a former Salomon Brothers investment banker, about 15 years ago at a dinner in New York. The two men, who remain close, discovered they had many mutual interests, including Rattner's investment banking expertise and interest in media properties. They both ski in Vail, Colorado and see one another there.
"I told Bloomberg I was terrible (at golf), but he said come along anyway," Rattner said. "He's always saying life is not a zero-sum game, you don't have to beat someone else in order to win. He basically plays against himself." There is more than friendship involved: Rattner has served as an investment adviser to the multi-billionaire founder of the Bloomberg LP media empire.
To stay in shape, the 58-year-old Rattner says he works out six days a week, including cardio, weight training and exercises under the direction of a trainer. He also is a pilot, he said, so I asked what kind of plane he flies.
"Not going there," he said, with a smile, perhaps recalling the roasting that members of Congress gave CEOs of the Big Three automakers - and the resulting public relations debacle - after they flew company jets to Washington in November, 2008 in search of financial aid. How about a hint as to whether he flies a prop or jet aircraft? "Not going there," he repeated.
Would Rattner rather be watching the Ryder Cup golf matches or the Yankees on television over the weekend? "This is something else that the Mayor and I have in common," he said. "I just have no interest in spectator sports and sports on television. Maybe if there's some really important game the kids want to watch. Or maybe some golf to see if I can learn. But that's it."
Rattner declined to comment, as he has to all interviewers citing his lawyers' orders, on his role in the investigation of New York's pay-to-play pension-investment scandal, in which public officials were accused of benefiting from kickbacks from firms soliciting their business. The Quadrangle Group, the private-equity firm he helped found, was accused of impropriety and settled the charges last April, while publicly disavowing Rattner with a statement implying he was a responsible party.
"It's extremely painful to find out that your former partners don't put any value on loyalty," he said. "These are people I worked with, one for 20 years, one for 16 years, one for 12 years."
With so much financial upheaval, it's not too strange that prosecutors and the public have been looking for culpability. Rattner acknowledges the "poor business judgment" shown by Wall Street firms, helping to create the nation's credit crisis and economic meltdown, "but what I'm worried about is the Wall Street doesn't get that, and the reason for all the vilification and why people are so angry at them," he said. "They jeopardized the health of their firms; in many cases they were selling products that they didn't believe in themselves.
"The flip side is that the financial industry is one of the world's great growth industries," he said. As government reforms regulations to make banks operate more prudently and efficiently "we shouldn't throw out the baby with the bath water."
More intervention from Washington probably won't be needed in Detroit, he opined, surely insofar as Ford Motor Co. is concerned.
Rattner praised Ford's management for fixing the automaker without government help, especially in light of its continuing weak balance sheet, compared to GM and Chrysler. "Car sales are cyclical, they're only going to go up from here," he said. "Ford is going to make a ton of money over the next couple of years."
But as the auto industry earns more, the United Auto Workers union leadership has promised to "take back" what it sacrificed in the course of the shared financial sacrifice among all parties leading up to the bankruptcies of GM, Chrysler and many suppliers. Skirmishes between the UAW and the automakers are perpetually in the news, like the one last week at GM's Lordstown assembly plant. Union members were vexed that GM was sending Chevy Cruze's to non-union repair shops.
"I worry about" union-management conflict, Rattner said. "They (the UAW) want to get back what they gave up, and that's not going to happen. We can't go back to 29 job classifications, the whole week off for the July 4 holiday, overtime pay when you work a short day and then a long day. These are changes that aren't pleasant, I know, but there's no going back."
For the time being, a weakened U.S. auto industry awaits a sales rebound and return a to profit that could put the UAW again on a collision course with auto-industry management.
As a private citizen, Rattner won't have to worry about the repercussions, nor his legacy for leading the financial rescue of a shattered industry.
If Rattner changes his mind about more public service, who knows? An enduringly healthy Detroit might prove to be Rattner's best argument in 2016 - or before - for an even bigger job in Washington.
About the Author
Doron Levin is a contributing writer to Edmunds' AutoObserver.com, writing commentaries, profiles and interviews, including AutoObserver's Power Breakfast with Power Brokers feature. Levin has been reporting on business and financial subjects from Detroit, specializing in the global auto industry since 1984. He has been a correspondent for the Wall Street Journal, bureau chief of The New York Times, and a columnist for the Detroit Free Press and Bloomberg. He is the author of two books, "Irreconcilable Differences: Ross Perot vs. General Motors" and "Behind the Wheel at Chrysler: The Iacocca Legacy"