Subtitled “An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry”, Rattner explains the events behind the splashy headline (“Car Czar”, anyone?) and partisan politics of the auto bailout. I like to think of myself as politically aware but even I was stunned at what”Team Auto”, as Rattner called his group, was doing in the background, cutting through the government bureaucracy and making decisions without the American people really being informed. Not to mention Canadians and Germans (the later of which I had no idea was involved) with a vested interest in the success of General Motors/Opal and Chrysler.
The ultimate insight of this book is that General Motor (GM) and Chrysler were poorly run companies. Both companies blamed high labor costs, as established by the United Auto Workers union, for their woes and, yes, high fixed costs created an incentive to build as many cars as possible so as to reduce the average cost per car resulting in “what no businessperson would want – a low-profit-margin business that is vulnerable to any slackening in consumer demand” (pg. 87). These problems — from production to sales — do not plague import automakers like Toyota and Honda.
“While GM sold about 30 percent more vehicles in the United States than Toyota, GM had four times as many dealers, roughly 6,000 compared to 1,450. Thus the average GM dealer sold 450 vehicles, compared to 1,500 for the average Toyota dealer.” (pg. 194)
Yet, GM repeatedly came to the United States government with unrealistic projections and expectations in the face of a major economic crisis. At one point, the company’s worst-case scenario was a 20 percent increase in car sales! There were other issues — mainly that GM never could state what their bottom line was because inter-agency accounting didn’t exist. Team Auto and President Obama received a lot of criticism for their decision fire the CEO of GM but, based on this presentation, keeping he around would be idiotic, at best.
I also had no idea how close Rattner, Team Auto, and the Obama Administration came to deciding to abandon Chrysler. The final vote was 51-49 in favor, if I recall correctly. Rattner explained both sides of the debate very effectively; the largest concern with keeping Chrysler afloat was that doing so would create competition for the fledgling new GM. I’m not sure I agree with their final decision, but deciding the winner and the loser would have been political suicide.
Despite how interesting all this information is, this book is not the easiest to read. There is such a thing as too much information, too many details, and the book plods along because of it.
- Rattner, Steven. Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry. New York: Houghton Mifflin Harcourt, 2010. eBook. 315 pgs. ISBN: 9780547443218. Source: Purchased.
The Honors Project:
I read this book for The Honors Project, my own personal challenge to read more books about economics, food, and/or geography in preparation for writing my honors thesis. My goal for this project is to learn as much as I can about these topics so I can formulate better questions and, in turn, produce a better honors thesis. You can find out more information by checking out my introductory post, project post, or spreadsheet of titles.Book Cover © Houghton Mifflin Harcourt. Retrieved: July 15, 2012.