The man who helped rescue Chrysler Group LLC from the brink of collapse in 2009 says its success since then is the biggest surprise from the U.S. government’s bailout of two Detroit auto makers.
Steven Rattner, who led the team that engineered the $70-billion (U.S.) rescue of Chrysler and General Motors Co. said U.S. government officials came close to permitting the liquidation of Chrysler instead of bailing it out. But they made what amounted to a bet on Fiat SpA chief executive officer Sergio Marchionne and his proposal that Fiat take over management control of the No. 3 Detroit company.
“I thought Sergio was a great guy. We bet on him... but never in a million years imagined it could go as well as it has gone,” Mr. Rattner said Wednesday after a speech to a Canadian Automobile Dealers Association conference in Toronto. “He’s one of the most extraordinary managers I’ve met in my entire career.”
Chrysler has recovered so dramatically that it is now the cash cow for Fiat, which has been battered by the collapse of the European auto market because of the debt crisis.
The latest evidence of Chrysler’s strength came two weeks ago when it reported final profit of $1.7-billion in 2012, up from $183-million a year earlier.
As he did in a book he wrote about his experience as President Barack Obama’s car czar, Mr. Rattner outlined the disastrous shape the new administration discovered Chrysler and GM were in when they arrived in office in January, 2009. A so-called quick-rinse bankruptcy with governments providing the money was the only option to save the companies, he said.
“We were terrified of a bankruptcy,” he said. “We thought there was a real possibility people would stop buying cars.”
The pleasant surprise about GM, he said, is that not long after it emerged from Chapter 11 bankruptcy protection in 2009, the company was surpassing most of the financial targets the rescue team projected it could meet.
Average transaction prices per vehicle in the U.S. market were projected at $23,799 and they hit $29,583 in 2010.
“They really knocked the cover off the ball,” he said.
Nonetheless, GM still has management challenges, he noted, including increasing profit margins to match those of cross-town rival Ford, which took out a $23-billion loan before the credit crisis, which enabled it to avoid bankruptcy protection and keep investing in product development during the recession.
The biggest challenge Detroit faces are the competitive threats from offshore-based manufacturers, said Mr. Rattner, who is now Chairman of Willett Advisors LLC, the investment arm for New York Mayor Michael Bloomberg’s personal and philanthropic assets.