Overhaul (45 page)

Never mind that Ed Whitacre was pushing Fritz to cut back on direct reports—Sergio was doing exactly the opposite, flattening Chrysler's organization so that he directly supervised twenty-five executives, not including his Fiat reports. (I later learned that Alan Mulally had a similarly flat structure at Ford.) This difference in philosophies fascinated me; ultimately I concluded that either approach could work with the right CEO and the right team. Sergio, perhaps the most extreme workaholic I have ever encountered, wanted to be involved in innumerable decisions without being slowed by bureaucratic layers. Ed, by contrast, had no interest in working Sergio's hours and preferred to empower the people under him to make as many decisions as possible.

Chrysler headquarters was so large that Sergio used a golf cart to get around. He tried to give us a tour but got lost in the honeycomb of underground passageways, and we had to stop repeatedly to ask for directions. Eventually, we settled down in a large conference room near Sergio's office for a briefing by his top executives. Sergio, Ron, Clay Calhoon, Brian Osias, and I faced a projection screen at the far end of the U-shaped arrangement of tables. It had been just over a month since Chrysler had emerged from bankruptcy. While the new Chrysler's plans were still very much in formation, we were eager for an update and a chance to meet the new team. As slides flashed by on the screen, we fired questions at the executives. Some of the material was also new to Sergio, who made no effort to pretend that he knew it all.

When the presentation turned to Jeep, Michael Manley, the British head of the Jeep brand, said that the company would continue to manufacture both the Liberty and the Patriot, mediocre vehicles that were similar in design. "Why do we have two?" Sergio interjected. "In the future, we're not going to have both of these. We're going to consolidate." He had the same reaction upon hearing that both the Dodge and the Chrysler minivans (essentially the same design) were still being built. "There is only going to be one minivan," he declared. This was decisionmaking Sergio-style: quick, instinctive, and sure-footed.

I flew back to Washington that afternoon feeling that we had left both GM and Chrysler in very capable hands, with every opportunity to succeed. The headlines that day were full of GM's emergence from bankruptcy, and the front page of the
Wall Street Journal
acknowledged Team Auto's work: "The quicker-than-expected reorganization could represent a major accomplishment for the Obama administration, which committed $50 billion to GM as part of its bailout of the U.S. auto industry."

Meanwhile, since its eruption in mid-April, the pay-to-play controversy in which I was embroiled had shown no signs of going away. Instead it was intensifying, as New York Attorney General Andrew Cuomo decided to dig more deeply and other jurisdictions began their own examinations. At the same time, with the emergence of both companies from bankruptcy, it was time to take our hands off. Almost immediately, my workload dropped precipitously. After feeling as if I had several full-time jobs crammed into one, I found myself with idle hours. I contemplated other assignments within Treasury or the broader administration, and I talked with friends, including Mark Patterson, Tim's chief of staff, about what to do next. After reflecting on these conversations, however, I concluded that trying to undertake another government role at that point would be too complicated for both me and the administration.

We had just finished building a house on Martha's Vineyard, where I had vacationed for more than thirty years, and I had twin sons entering college in September. The prospect of a month on the Vineyard with them was tantalizing. Shortly after my return from Detroit, I talked with Mark again and told him that I had decided to leave Treasury at the end of July. In the press statement announcing my departure, Tim was incredibly gracious, as he had been throughout my time under his command. "We are extremely grateful to Steve for his efforts in helping to strengthen GM and Chrysler, recapitalize GMAC, and support the American auto industry," Tim said in the news release. "I hope that he takes another opportunity to bring his unique skills to government service in the future."

I had made a point of taking Team Auto out for a celebratory dinner after each of the President's national addresses, which represented our three major milestones. On July 21, we convened for the fourth and last time, at the same Rosa Mexicano restaurant, in Washington's newly renovated Penn Quarter, where Bob Corker and I had dined exactly four weeks earlier. Safely sequestered in a private room, we let loose, aware that our adventure together was nearing an end. The liquor flowed freely, cell-phone cameras flashed. In due course, I stood up and tried to pay tribute to the work we had done.

Such celebrations, I reminded my colleagues, are standard on Wall Street at the successful close of a deal. But in those victories, the objective is private gain. This victory was different. I choked up as I spoke about our commitment to quality. "I've worked with a lot of talented people in my life but never with a group smarter or more dedicated than Team Auto," I said. And I thanked my colleagues for the enormous sacrifices that each had made. "In this deal, in this incarnation," I said, "you have epitomized what it means to serve your country."

Fortunately, after I spoke, Ron Bloom was there to lighten the mood. "I did this all for the unions!" he jokingly declared.

Everyone laughed and the war stories began to fly. Cell-phone images from later that night reveal that as the celebration went on, the rowdiness quotient rose. One set of pictures shows an impromptu contest to see how easy it would be to power-lift a supine Sadiq. "Leave the little guy alone," he kept protesting. I left after eleven, well past my normal early bedtime, but the party went on. Harry managed to fall asleep standing upright against a pillar during after-dinner revelry at the open-air roof bar of the W Hotel across from Treasury.

The next night, another muggy July evening just two days before my departure, I walked out of Treasury through the south doorway, the opposite end of the long building from where I had first tried to enter many months earlier. A tourist who had stopped to take a picture of the statue of Alexander Hamilton, the founding secretary of the Treasury, recognized me. "You guys did good work," she said. "He would have been proud of you."

H
ARRY WILSON HATED
the idea of letting go of GM. All spring he had pressed me, higher-ups in the administration, and even GM executives about the possibility of an ongoing federal involvement—"so they won't fuck up what we did," as he put it. His proposals ranged from a senior-level consulting assignment for himself inside the company to his being part of a government monitoring group that would be on hand for monthly board meetings and quarterly gatherings of senior management. The group would also help with the search for a new CFO and with decisions on supplier relations, Asian joint ventures, and more.

Ron Bloom found all this highly amusing—dealing with GM had turned Harry, the fiercest laissez-faire capitalist on our team, into an outright government interventionist. Harry argued he was just carrying out our mandate to safeguard the taxpayers' investment. But by late July, mostly because of the administration's hands-off policy, it became clear there would be no long-term role for him or any task force member inside GM. Harry was boxed between Ed Whitacre, who at the outset had elicited from me a commitment that the board would be free to run the company, and Larry, who was unyielding in his view that continued intervention would bring more risk than reward. Bowing to the inevitable, Harry proposed a sort of formal handoff: a briefing of the incoming board by Team Auto. Whitacre liked the idea, and a date was set for Monday, August 3, the day before the first formal meeting of the new GM board.

"We have been living and breathing GM for months, and we want to be very honest with you," Harry began. He was seated at the head of a long rectangular table, flanked by Ron and other members of the team, in a conference room at the GM Tech Center. Next to Sadiq, across from Harry, was Ed Whitacre, and around the table were the other directors of Shiny New GM, assembled in person for the first time. Only two of the thirteen were absent: David Bonderman, because of a long-standing prior commitment, and Fritz, who as head of current management had been excused from the briefing.

The potential for division among the new board was not lost on the attendees. Around the table, they had mostly segregated themselves into two groups—five who had been members of the board that had allowed GM to careen off a cliff and six new members who had been chosen in part because of their reputation for toughness.

Harry launched the presentation with a thirty-three-page report, which the team intentionally did not hand out in hopes of avoiding leaks about the Treasury's withering views of GM. It was organized in three main sections—GM's past successes, a recap of the bankruptcy, and GM's challenges—whose page counts alone reflected the team's mindset. GM's triumphs got three pages, including a cover page—very different from the glass-half-full presentations to which the old GM board had been accustomed. The bankruptcy recap got ten pages. And the bulk of the report dealt with GM's challenges.

Harry began the third section by laying out our scathing opinion of GM's culture in bullet points that pretty much spoke for themselves. "Insularity," which Harry called "The GM Way," came first. Then "lack of accountability," followed by "[lack of a] sense of urgency," "need for more change agents," and a "culture of losing." "If you really think about GM and where they are coming from," Harry said as he pointed to a line about consistent market-share losses for thirty-three years, "they've mostly lost. Most of these managers have never won." He also knocked the company for bad supplier relations, for GMAC's misadventures in subprime mortgages, and for the lack of "green" cars on the road.

The room was quiet. Some old board members were shifting in their seats. Kent Kresa and a few others nodded when Harry lambasted GM's bureaucracy and inability to make fast decisions. Whitacre, rarely one to speak much, occasionally murmured, "That's right."

To highlight GM's weaknesses in finance, Harry went back to one of his favorite criticisms: poor cash management. Kathryn Marinello, an information services executive who had joined the board in 2007 just as the company entered its death spiral, spoke up. "We knew something like this was going on. We were asking for that kind of information. But GM wouldn't give it to us." (Her comments struck some board members as ironic, because she had earned a reputation for talking too much at board meetings and saying too little of interest.)

David Markowitz, who felt no director of the Wagoner era should have been allowed back, glared.

Harry also harped on the need for change agents at GM, people from inside or outside who would shake the place up.

"I get it. The top management is not good," interrupted Patricia Russo, the ex-CEO of Alcatel-Lucent, who was new to the board. "But do you see that spark somewhere?"

Harry paused for a long time and volunteered a name: "Bob Lutz."

"I don't think he's that good," objected Steve Girsky, the former Morgan Stanley analyst who now occupied the UAW seat on the board.

"We like that he actually knows product," said Harry. "But we need more like him that are younger."

I would have agreed with Girsky. Lutz's swashbuckling personality stood out at fusty GM but I'd never been overwhelmed by the substance of what he had to say. And I'd been somewhat dismayed that Fritz's idea of change was to let the seventy-seven-year-old Lutz "unretire." But in truth none of us on Team Auto was a management expert.

The atmosphere seemed to become more tense as Markowitz took the floor to highlight problems related to vehicles, brands, and consumer perceptions. Old board members who had been nodding in agreement began to grow defensive. Team Auto named a few executives whom we thought were lacking, which some of the old board thought unseemly and harsh. Meanwhile, new board members muttered and shook their heads. When David reminded them about the market share loss, Whitacre offered one of his few unsolicited comments. "That has got to stop. Just can't have that," he said. From his first moment at GM, Whitacre had made clear his view that continuing loss of market share was a recipe for another failure.

The session, which was supposed to run for an hour, pushed closer to two. Finally the focus turned to Fritz—whom, after all, the task force had chosen as CEO.

"Does he have a chance at success?" Whitacre asked Harry point-blank. Another director echoed, "How positive are you that Fritz can bring about all that change that is needed?"

Harry told the board that at first he'd assumed GM would need a CEO from outside. "But eventually I realized that Fritz gets it. He has shown a capacity for change." He related the anecdote of Fritz's struggle in March to answer a question about GM's culture, and how finally he'd said, "It's the only culture I know." To Harry, this showed Fritz could recognize and be honest about his shortcomings, even in a big group setting.

Neville Isdell, a former Coca-Cola CEO who had been the last to join the old board, asked what were Fritz's odds. Bloom volunteered that Team Auto saw him as a 60–40 proposition, with some thinking he had a 60 percent chance of success and others putting it at 40 percent. Harry tried to soften things by putting his own odds of Fritz's survival at 60 percent. Even so, the directors seemed stunned. On their first day on the job they were being told they would as likely as not have to fire the CEO.

As the meeting ended and the board rose to leave, Whitacre quietly asked Sadiq for a copy of the presentation. Meanwhile, Isdell came around the table and told Harry, "You guys did a great job." In the coming weeks, many directors would tell me that they both appreciated the candor of the briefing and were dismayed by much of what they heard. None took issue with the core message.

It was not lost on Fritz that the new board was hearing from Team Auto before it heard from GM, but that had been Whitacre's wish. The next day, the board assembled at the Milford Proving Ground, northwest of Detroit, for a chance to see GM's vehicles and drive them on the test track. This helped lighten the mood. Recent models had been winning good reviews, and old board members got a kick out of hearing new members make comments like, "Wow, I didn't know Buick made a car like this."