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GM needs 'amputation': former US auto adviser

(Agencies)
Updated: 2009-10-22 17:56

CHICAGO: The Obama administration's former top auto adviser Steven Rattner said Wednesday that General Motors Co. (GM) needed an "amputation" to be saved.

According to a Detroit News report, Rattner admitted in a speech sponsored by the Brookings Institution in Washington that "at GM, we faced a bigger management challenge than even its reputation led us to expect.

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"Take, for example, the lack of financial discipline. We saw no indication of the finance staff pushing back on the operating divisions to achieve better results, as is customary," he continued.

It was also clear to the administration's auto team that GM needed bigger cuts than the automaker had proposed in February. "Only through amputation could GM be saved," Rattner diagnosed.

Rattner, once a Wall Street adviser, reiterated his criticism of former GM CEO Rick Wagoner.

"It seemed obvious that any CEO who had burned through $44 billion of cash in 15 months should not continue," he said. "Perhaps because of its lack of financial discipline, GM was in important ways in worse shape than Chrysler."

Repeating the Obama administration's long-held contention, Rattner made it clear that the government, which now owns 61 percent of GM and a minority stake in Chrysler, didn't want to own parts of the automakers.

Rattner explained that based on the value of the debt being traded in the "Old GM," known as Motors Liquidation Co., the government's 61 percent stake in GM was worth about $17 billion. Along with its $8 billion in debt, that meant the government's $50 billion were worth about $25 billion.

Rattner conceded that GM's new President and CEO Fritz Henderson was talented, but must continue to show GM's board that he was the right man for the job.

A long-term prognosis for GM and Chrysler was likewise uncertain, Rattner added.

"Like any patient that undergoes major surgery, a successful recovery is far from assured," he declared. "It is still a work in progress. I don't think today one should pronounce victory or defeat."