Overhaul (16 page)

"Why don't we just give him the company?" I said in exasperation after I got back to my office with Ron, Harry, and our younger colleagues. "I don't think there's a deal here." I asked the others what they thought, and the consensus was that I should go back to Sergio and ask if Fiat would put up capital. I made that phone call, and Sergio essentially said "No way." Plainly, if we wanted to do business with Fiat, the American taxpayer would have to bear all the risk. The rescue of Chrysler might have ended right there had not Sergio seized on an invitation to come back for a do-over. He returned the following week with a much more careful and detailed presentation that gave us confidence about his understanding of the company and his ability to turn it around.

The next day brought my first meeting with the cabinet-level Auto Task Force, in the West Wing's Roosevelt Room. Nearly all the attendees understood this session was purely ceremonial, but a couple—such as Energy Secretary Steven Chu—weren't yet versed in the ways of Washington and thought they were there to provide substantive input. After the meeting adjourned, as we walked through the reception room of the West Wing on the way back to Treasury, Larry paused to review a few items, including the work that was under way on
SAAR,
the seasonally adjusted annual rate of sales.

While the red tape of the federal government can be maddening, it can often be offset by the extraordinary resources available to analyze a problem. In leading our
SAAR
work, Harry Wilson had drawn on economists at Treasury and the Council of Economic Advisers, as well as a team of experts from Boston Consulting Group. I was relieved that the conclusions largely mirrored my own general thoughts. While we were probably facing a depressed
SAAR
of 10.5 million to 13.5 million for 2010, we could anticipate an eventual recovery to 15 or 16 million.

The discussion became more animated as we stood explaining our work on
SAAR
to Larry. Diana, recognizing that we were standing in a place where our private business might be overheard by waiting visitors, kept shushing our group, to little avail. Finally, Darienne, the receptionist, came over and told Larry that he could not use her waiting room as a meeting area. In Deese's experience, that was not an unusual occurrence, as Larry had a tendency to hold court there. Looking around at the waiting room, I thought the West Wing deserved better. The room had a tattered feeling, with its heavy-duty beige wall-to-wall carpet and worn furniture. It looked as if it had been lifted from the pages of
Reader's Digest.

We knew we could function most efficiently by staying put in D.C., yet we realized from the outset that we'd have to make at least one trip to Detroit to avoid more criticism from the heartland. By early March, we could delay no more. All the same, we were determined not to waste more than a day, and so arranged a packed itinerary that would touch all the right bases. To satisfy the futurists, we would visit GM's Technical Center and drive its next-generation vehicles. For traditionalists, we would tour an old-line Chrysler assembly plant. And to acknowledge the importance of labor, we would visit with UAW leaders at their headquarters, Solidarity House. I was half asleep as I debarked from my Northwest Airlines flight at 8
A.M.
at Detroit's Metro Airport. I was stunned to find myself in one of the most modern and luxurious terminals I had ever seen. Somehow, I'd imagined that a burned-out city would have a burned-out airport. As I passed a newsstand in the concourse, the blaring headline of one of the local newspapers caught my eye: "Hear Us Out, We're in Crisis."

We knew that every aspect of our trip would be scrutinized, so we'd pondered at length how to get around the Motor City. We didn't like the idea of having GM or Chrysler pick us up, and didn't want to show favoritism in our choice of a car to drive. We'd settled on what seemed like a neutral option: we rented a Ford Escape from Budget. (Haley had made sure it had a GPS, since none of us knew our way around Detroit.) Ron drove, with Brian, Diana, and me as passengers.

Our first stop was Solidarity House. As I had told Ron when we first met, I believed in saving jobs. I had also written op-eds about America's growing income inequality and about the declining real wages of workers. I believed that organized labor could be a constructive part of the solution as long as it focused on those issues, rather than on featherbedding, trying to protect workers who were not pulling their weight, and blindly fighting technological change. During my eight and a half years at the
New York Times
I'd been a card-carrying member of the Newspaper Guild and had watched the company's eleven unions make all those mistakes. They'd ended up hurting both the workers and the
Times.

With that experience, and having also absorbed the conventional wisdom that the UAW was a big part of the auto industry's problems, I arrived at Solidarity House expecting to be harangued. The building was eerie. It had been built of steel, glass, aluminum, brick, and stone in 1951—the year before I was born—when the UAW had 1.2 million members; Walter Reuther, its legendary president, had proudly called it "the labor university of the future." But now the UAW was down to just above 400,000 members and Solidarity House looked like a man whose clothes were too big.

Soon after we reached the main conference room, however, where Danish, orange juice, and coffee awaited, my mood changed. Ron Gettelfinger and his team greeted us, dressed in casual clothes, with the UAW logo emblazoned on the left breast pocket of their button-down shirts. It was a visible contrast with our business suits. And far from browbeating us, they gave a thorough presentation that included as many details and figures as investment bankers would have used. (I later learned that my old firm Lazard had helped prepare it.) The presentation argued that the wages of workers at GM and Chrysler were competitive with those of the transplants, as the Bush loan agreements required.

Gettelfinger himself intrigued me. He'd been UAW president since 2002, and with his trim frame, white brush mustache, and crisp manner of speech, he hardly fit the mold of a union boss. Raised on a southern Indiana farm, he'd started as a chassis-line repairman at Ford's Louisville, Kentucky, assembly plant in 1964. He earned an accounting degree, attending night classes at Indiana University, and by 1979 had worked his way up to UAW plant chairman. He became known for forcing union concessions and forging better relations with management, moves that helped persuade Ford to keep the plant open.

Unlike many UAW leaders who gained a following through an outsize personality, Gettelfinger rose through relentless attention to detail and unflinching honesty. His entourage was minimal and he was close to few people. He didn't drink, didn't gamble, had quit smoking, and usually brought his wife, Judy, along on business trips. As president, he banned the Friday golf outings that UAW officials traditionally took with their management counterparts. He felt they were unseemly and sent the wrong message to union members.

In 2003—when GM posted its best full-year profit under Rick Wagoner—Gettelfinger had negotiated a national contract that protected many members' wages and benefits. Nearly every year after that had been spent in retreat. Gettelfinger agreed to concessions that had been anathema, from two-tier wages that committed new hires to a lower pay scale, to making billions of dollars in health care cuts that involved reopening a contract with GM that was already in place. He told the rank and file in a 2006 speech: "The challenges we face aren't the kind that can be ridden out. They're structural challenges, and they require new and farsighted solutions." Hiring Lazard reflected his perceptiveness. Although the move angered some members who mistrusted Wall Street, Gettelfinger knew the union had to be ready in the event GM's problems spiraled out of control. I left thinking of what Margaret Thatcher once said of Mikhail Gorbachev: "We can do business together."

From Solidarity House we drove to GM's fabled Tech Center in suburban Warren. A car with a news photographer flanked us, his camera clicking away. More interested in architecture than in cars, I knew that the Tech Center had been designed by the great architect Eero Saarinen in the late 1940s and was known around the world as an icon of modernism. On that score, it didn't disappoint. Wagoner and his team took us on a tour to see models of new vehicle designs. He paused to show off the electric-powered Volt, which looked fine on the outside but had an interior that seemed like an Apple iPod knockoff.

Next it was time to drive. I knew that car manufacturers share a marketing principle with airplane makers: put a reviewer behind the wheel or at the controls, and you generally get a positive result. I was no exception. With Rick riding shotgun—clearly a veteran of many such test drives—I navigated the campus of the Tech Center. The Volt drove surprisingly well and accelerated far better than I'd expected. It was noiseless and smooth and did not noticeably shift gears. Other prototypes we tried—fuel cell cars and hydrogen-powered cars—elicited similarly positive reactions.

After the fun, we settled into a conference room with Rick and his team. In deference to government ethics rules, we each handed over $11 in cash to a GM aide and in return got a box lunch and a receipt to turn in to Treasury for reimbursement. We discussed the prospects of the Volt, and it quickly became clear that the car had commercial clay feet. At least in the early years, each Volt would cost around $40,000 to manufacture (development costs not included). But in size, features, and performance, it would have to compete with the Chevy Malibu and similar cars, which sold for around $20,000. Because of legislation passed in 2008, buyers of plug-in electric cars would receive up to a $7,500 tax credit—a big incentive, but not enough to bridge the cost gap. The bottom line was that there was no way for the Volt or any next-generation car to have a positive impact on GM's finances any time soon. Certainly not within the five-year framework that private equity firms typically use to evaluate investment opportunities.

We touched on many other subjects, including the difficulties of GM Europe. But on the whole, the session was staid, genteel, and devoid of drama, reflecting the company's personality and that of its CEO. A casual eavesdropper would never have guessed that this company had gone off the edge of a precipice and was now in free fall.

As we finished lunch and got up to leave, GM's security people reported that a flock of reporters and camera people had staked out the Tech Center's main gate. GM sent us out the back way, which Diana thought was an odd decision, since the whole point of our trip was to be seen. When we pulled up at the Chrysler factory a few miles away, the media were waiting there too. Reporters shouted questions and cameras zoomed in on us through the fence as we walked from our Escape; we spied a news helicopter circling overhead.

We began with Nardelli and his colleagues in the plant manager's office—a decrepit conference room with binders and trophies lined along the shelves, which reminded us of the office of a high school basketball coach. The contrast with the setting at GM could not have been more stark. Chrysler had wanted us to go to its design center, in its modern, monumental headquarters complex. But Auburn Hills was a long drive to pack into a crowded day, and for symbolic reasons, our Detroit visit required a factory tour, so here we were at the Warren Truck Assembly Plant, where Dodge Ram pickups were put together.

The tone of the meeting was also a far cry from our session with the GM execs, in part because we had come with a stark message that seemed very much in keeping with this aging facility: while our public posture would remain that we were continuing to study the Chrysler submission, our real assessment was that the standalone Chrysler plan simply didn't work.

The Chrysler executives pushed back hard. Diana—the former management consultant—was struck by the differences between the two cultures. In contrast to the mildness we'd encountered at GM, the Chrysler executives came across as rough and edgy, almost defiant.

As we went down a set of narrow metal steps to begin our tour, Nardelli looked over his shoulder at me on the stair above him. "Your assessment just wasn't fair," he said. He felt that we'd given him and his company short shrift in more ways than one. Chrysler was the last stop on our itinerary, and because we'd arrived late, our visit was rushed. His team had gone to great trouble to bring its latest models from Auburn Hills to Warren; for security reasons, prototypes were not usually allowed outside the design center.

Nardelli led us to a large white room in which a half-dozen gleaming vehicles were arrayed in a semicircle on the concrete floor. The purpose of this showing was to convince us that the cupboard was not as bare as everyone thought. We walked among the vehicles—sedans and trucks and even a Fiat 500—as the Chrysler people talked about advanced hybrid power trains and new, environmentally friendly diesels. But by this point our goal was not to miss our flight back to the mountain of work that awaited us in Washington. So we only had time for what amounted to auto speed dating, a quick hop from car to car.

The factory itself was an old-line Depression-era assembly plant, built in 1938. We raced through this as well. I wanted to stay longer—watching truck bodies drop onto chassis in the modern equivalent of Henry Ford's assembly line is a thrill for more than just young boys. I also found myself looking at the workers, a mix of old and young, male and female, black and white. I was well aware of Detroit's 22 percent unemployment rate (it would soon reach 29 percent) and its lack of virtually any new jobs, never mind high-paying ones for manufacturing workers. These workers, I realized, were dependent on us, their futures in our hands. If we failed, and the automakers collapsed, they would be jobless, perhaps for the rest of their working lives.

After running the press gauntlet again, we dashed for an evening flight back to D.C. As we drove to the airport, we passed through downtown Detroit at rush hour. It felt like a ghost town. "Where is everyone?" one of my colleagues asked. The stark images of a seemingly evacuated city and the weary faces of assembly-line workers stayed with me, and I would think of them often in the ensuing weeks.