Once Upon a Car Part 17

Without knowing it, both companies had crossed a critical line. The Obama administration had to honor the loans and terms negotiated under President Bush. But once GM and Chrysler asked for more money, it changed everything. Any new funding would come with new conditions set by a new president. The U.S. Treasury wasn't an ATM machine for troubled corporations. Federal loans came with strings attached, and the Detroit Two would have to accept whatever Obama's team demanded if they wanted to get additional dollars. Rattner wasn't sure the government would ever recover the Bush loan money from the battered automakers. But he certainly would not recommend that GM and Chrysler receive more public funds without a reasonable possibility that the loans would be repaid.

The task force's bigger issue was deciding whether to give more aid at all. What if Obama decided to take a pa.s.s? Would uncontrolled bankruptcies at GM and Chrysler devastate the economy just a few short months into his presidency? The nation was already losing hundreds of thousands of jobs in February. A GM failure could double or triple that in an instant. "We were quite concerned about the downward spiral of a GM bankruptcy and the cascading effect," said Brian Deese of the task force. "This is a case of you don't know what you don't know."

The auto team took the viability plans for meetings with White House chief of staff Rahm Emanuel, Tim Geithner, Larry Summers, and other senior administration officials. In his book Overhaul, Rattner recounted with fascination Emanuel's salty language and devil's-advocate approach to the issue, questioning whether GM should even be saved. Polling data showed minimal public support for bailing out Detroit. But it wasn't time for a decision yet. The two automakers had made their best case for loans, and now "Team Auto" (as Rattner nicknamed his squad) had to do a huge amount of due diligence before formulating options for the president by the end of March.

Their job was roughly split in two. One half was like cramming for a ma.s.sive test on how the automotive business worked. Day after day, the team interviewed industry a.n.a.lysts, academics, dealers, suppliers, officials from auto communities-anyone who could bring them up to speed fast on the complexities of the American auto industry. They also met with Marchionne and his Fiat executives, the committee representing GM's bondholders, and officials from competing carmakers.

The rest of their efforts were devoted to face-to-face meetings with management at Chrysler and GM. Bob Nardelli and his guys came first. Rattner was impressed with the Chrysler CEO's gung-ho att.i.tude but not with his company's paper-thin blueprint for restructuring. The task force was extremely skeptical about the outlook for Auburn Hills. To them, Chrysler was looking like a lost cause already.

At the last minute, Marchionne had refused to let Chrysler include specific details of their alliance strategy, and the viability plan seemed way too speculative without the Fiat component. Nardelli was furious at Fiat's move. "What do you mean we can't use the numbers?" he barked at Marchionne. "We spent thousands of hours working on this thing!" Worse yet, Chrysler had been unable to extract any concessions from JPMorgan Chase and the other banks that had lent it money.

The six-hour meeting with GM was even worse. Rattner was instantly turned off by Wagoner's style and demeanor. The GM chief executive opened the session with introductory remarks, then handed off the entire presentation to Henderson and Ray Young. In the private equity world, Rattner was used to hyperaggressive management teams pitching their ideas and plans with vigor. By comparison, Wagoner seemed maddeningly detached and above it all. "He presided rather than rolled up his sleeves," Rattner said. "When you want to sell somebody on something, you've got to be a salesman."

The meeting was the beginning of a torturous, tempestuous relations.h.i.+p between GM and the task force. Over time, Rattner and the banker Harry Wilson developed great contempt for the General Motors executives-especially for Wagoner and Young. "It's a culture of losing," Wilson concluded. Rattner considered the company's finance department the worst he had ever seen and felt its management was insular, arrogant, and terribly resistant to change.

Rattner was especially irked by how GM acted as if it were ent.i.tled, too large and powerful to fail. With all the losses, mistakes, and humbling setbacks it had experienced, how could this organization go on believing it deserved the open-ended support of the federal government and American taxpayers? Rattner appreciated that GM had talent and skill, modern facilities, and a core of solid products. But he was offended by its self-important att.i.tude. He didn't like Wagoner or his viability plan at all. "His homework a.s.signment got a failing grade," Rattner said. "It wasn't a pa.s.sing grade. So if you're the teacher, what do you do? You don't promote the kid." Ron Bloom was less judgmental but just as put off by what he heard. "No one at GM said, 'What we need to do is draw a clean sheet of paper and ask ourselves who we are and what we need to do,'" Bloom said. "It was like, 'Everything is going to be okay because the market is going to come back and we're going to tighten our belts.'"

The task force had uncovered what people in the auto industry had known for years: GM was all about muscle and scale and a righteous belief that it was the backbone of the American auto industry. It led, and Ford and Chrysler followed. In its view of the world, the only reason Toyota and the other Asian companies made more money was because "Generous Motors" had been too benevolent with its army of workers, retirees, and pensioners. Was it cursed by "friendly arrogance," as Rattner dubbed it, or a stubborn streak of misguided optimism? The men and women inside General Motors could privately admit when the company screwed up, but the corporation could not. There was always an explanation, never an admission that maybe, just possibly, GM had taken a false turn or made a bad move. How could the greatest car company on earth be wrong? Time and money were always the answer.

Bloom wanted a clean sheet of paper. General Motors brought an encyclopedia. This was an inst.i.tution enthralled with its heritage, image, and mission. If the bigger fall harder, GM was cras.h.i.+ng down with a force never before witnessed in American business. The sad part was that it didn't know how to be humble or admit that outsiders might actually have better solutions. It was an empire that accepted no limitations, always expanding, dedicated to replicating its U.S. footprint in China, India, Russia, and beyond. But its foundation, the ability to earn a profit in its home market, had been crumbling for years. Now its leaders had awoken to find that the dynasty had been overrun by the mult.i.tude of problems from within. The structure had given way. There was no tourniquet or prescription to save a company that had long ago run out of money and was living on borrowed time.

If Wagoner had a sliver of optimism left, it vanished later that day when GM reported a $30.9 billion loss for its final results for 2008. Revenues had plunged 17 percent. It had lost money in every region of the world in the fourth quarter. The company was burning through an average of $60 million every twenty-four hours. There was just enough of a cash cus.h.i.+on to keep paying the bills, but even that wouldn't last much longer.

The auto task force went to Detroit for a one-day visit on March 9. It was almost a perfunctory step. Rattner and his team were under extraordinary time pressures to draft recommendations for the president. Still, it was impossible to avoid seeing the plants, facilities, and people whose fate was in their hands. Rattner arrived in Detroit on an early-morning commercial flight. One of the first things he saw was the banner headline on the Detroit Free Press: "Hear Us Out. We're in Crisis."

While Team Auto was making snap judgments about the leaders.h.i.+p at GM and Chrysler, the executives were doing the same with them. "This is a fiasco," Fritz Henderson said. "They want to come in and spend ten minutes looking at a plant and fifteen minutes driving the Volt? I mean, come on. I got the sense that this was check-the-box time: 'Okay, we visited Detroit.'" Bob Lutz thought Rattner and his crew were expecting decrepit factories and brain-dead engineers. "It was apparent in their att.i.tudes," he said. "Everything was f.u.c.ked up. Then the big surprise was how good our manufacturing, design, and engineering really was. Harry Wilson said to me, 'This is a nice plant, but how old is it? I'd like to go to the oldest plant possible.'"

The whole scene was surreal, with television news copters and a pack of media following the task force as they stopped at Solidarity House to meet with Ron Gettelfinger, then drove up to the GM tech center, and finally to Chrysler's Warren a.s.sembly plant. They didn't spend much time at the UAW, and that ticked off Gettelfinger. But at the GM tech center, they drove the Volt, had lunch with Wagoner and his executives, and got a full-court press on GM products.

The visit to Chrysler was not as smooth. Nardelli wanted the task force to come to Auburn Hills to see the best Chrysler had to offer. But the task force was crunched for time and wanted to at least step inside a real a.s.sembly plant. When they got to the Warren factory, Nardelli invited them into a conference room to talk before the tour. And it was then that Rattner decided to get very honest with him.

"Your plan is not viable," he said.

Nardelli was stunned. This was supposed to be an opportunity to show off Chrysler's cars, trucks, and state-of-the-art technology. Instead, Rattner was summarily dismissing the comeback plan Chrysler had spent five weeks slaving over. "I don't agree with you," Nardelli said. "This is not right. It's just not right."

But Rattner was in no mood for a debate. He had to catch a plane back to D.C.

Nardelli was steaming after they left. It was bad enough that Rattner had dumped all over his plan. But Nardelli had also learned that Fiat was holding its own meetings with the task force to talk about how the Italians could fix Chrysler! It all made sense now. His plan wasn't any good, so Fiat could just take over Chrysler and save the government the trouble of bailing out both Detroit clunkers. "Their mind was made up," Nardelli said. "Fiat wanted to take Chrysler off their hands. They couldn't sell two bailouts. So just give it to Fiat and be done with it."

Now he knew why Marchionne had refused to be part of the viability plan-the Italians had their own scheme to ride off with Chrysler cheap. From that point on, Nardelli gave Marchionne a new name: "Machiavelli"-like the Italian philosopher who wrote the book on cunning and deception.

The same day the task force was eyeballing GM and Chrysler, union workers at Ford approved an extraordinary round of concessions to let the company fund half the VEBA with stock, cap benefits, suspend cost-of-living raises, and cut holiday pay. This was exactly the deal GM needed-and Ford had set the pattern.

Alan Mulally and Lewis Booth, his new CFO, were also working on retiring $10 billion in debt by offering their bondholders cash and stock. GM needed the same type of arrangement, but its bondholders were holding out because they didn't want GM stock. The common stock would be the first pot of money to evaporate in a bankruptcy. But Ford's stock had promise. The Blue Oval wasn't going bankrupt-or taking government money. And that was becoming a more powerful message by the day. Jim Farley, his marketing guys, and especially the dealers were seeing it. Consumers were slowly but surely gravitating to Ford, the American car company that didn't want a bailout.

Sales numbers were down 41 percent for the entire industry in February. But at the Gla.s.s House, an internal momentum was building that was counter to the growing sense of panic at its crosstown compet.i.tors. "I don't think any of us were prepared for what was going to happen," Farley said. "But it became the best thing for Ford, all of the anger, the emotions, the hope, the pride. It was all coming out, and we changed as a team. We felt very special, all of us."

For Mulally, the resurgence was a thing of beauty. The hards.h.i.+p, the controversy, the compet.i.tive fire-this was what he lived for. Ford was winning. There was hope in Detroit. The market was terrible. But his people could not wait to get to work every day. "We believe in this plan . . . the dealers, the employees, the citizens of this country," he said. "Everybody is watching this unfold. In the first hearings we're all lumped together, we're all screwed up, 'you're horrible.' And now everything we're doing is why I came to Ford."

The task force was preparing for bankruptcies. Right after returning from Detroit, Rattner brought in Matt Feldman, whose legal specialty was the unique Section 363 bankruptcy, in which a company is split in two-the good, productive a.s.sets and the unwanted ones. Ron Bloom referred to it as creating a "s.h.i.+ny new GM"-without the redundant factories, dealers.h.i.+ps, and brands that had been suffocating its margins for years.

Rattner was also in full-on deal mode. He was getting ready for a head-on collision with Jimmy Lee, the crafty JPMorgan Chase banker who held a third of Chrysler's almost $7 billion in bank debt. Lee was still pus.h.i.+ng a merger between GM and Chrysler as a way for his bank to salvage its investment. But that wasn't happening. Instead Rattner was going to offer all the banks a billion or two at the most to walk away or else risk getting nothing in a bankruptcy. This was high-stakes hardball, the very reason Rattner had been brought in.

He also was preparing to fire Rick Wagoner. In mid-March, when Wagoner came to Was.h.i.+ngton for another round of talks with the task force, Rattner took the GM chief executive aside. "I sort of asked him about his plans," Rattner said. "You know, 'What are your plans? How do you think about life? What do you want to do?'"

This was Rattner's unsubtle way of letting Wagoner know he would be getting the axe and should start thinking about life after GM.

At first Wagoner seemed clueless. "I don't expect to be doing this until I'm sixty-five," he said. "But I think I have a few good years in me."

Rattner just looked at him, waiting for the real answer. Then Wagoner got the hint. He had once told Henry Paulson that he would resign if GM got Treasury loans. Was that what Rattner was getting at?

"Hey, I told the last administration that if it would be helpful in the effort that I would step aside," Wagoner said. "I'll give you the same message."

Good, thought Rattner. Now he knows.

March 26, 2009, was the day the president of the United States set aside time in the Oval Office to discuss what should be done with General Motors and Chrysler. The task force had been building its efforts methodically, and somewhat frantically, toward this moment. There was little debate among Rattner, Bloom, and the other six members about GM. Allowing GM to fail was not a serious option. But its plan had to be torn up and redone. And unless management could miraculously cut its debt and renegotiate its UAW contract, a controlled Section 363 bankruptcy was the best possible solution.

Chrysler was another matter. The task force was deadlocked on whether it was worth saving at all. Rattner voted to give Chrysler time to put together a lifesaving alliance with Fiat and turn its future over to Sergio Marchionne. Larry Summers broke the tie in support of that plan-mostly because an uncontrolled bankruptcy in Auburn Hills could destroy an estimated three hundred thousand U.S. jobs in a brief period of time.

The team also considered whether GM and Ford would be better off with Chrysler dead, so that they could capture some of its customers. That also might mean fewer federal dollars would be needed to pump up GM. But Chrysler would not go away quietly, without broader economic consequences. It would be up to President Obama to decide whether the country could live with that.

The morning meeting with Obama was just getting rolling when an aide interrupted and said another meeting was coming up fast. But the president wanted to keep the discussion going. "This is too important to decide in a rush," he said, according to Rattner's book. "We need to get together again later." They reconvened in the early evening in the Roosevelt Room in the West Wing. Geithner and Summers were there, as were Rahm Emanuel, David Axelrod, the president's senior political advisor, and Robert Gibbs, his press secretary. For forty-five minutes the task force detailed its findings to Obama, with Summers orchestrating the discussion.

Chrysler took the most time. There still wasn't consensus on whether to give it another chance. The president listened to all the arguments pro and con, then didn't waste much time deciding. "I'm prepared to give Chrysler thirty days to see if we can get the Fiat alliance done on terms that make sense to us," he said, according to Rattner. Then he accepted the task force's other recommendations.

Wagoner's firing was never even brought up, but it was already a done deal. Henderson had known it was coming when Wagoner told him about his earlier conversation with Rattner. Henderson had had his own discussion that same day with the task force chief about his future. "Steve wanted to know my views of the company, what I would do with it," Henderson said. "I thought to myself, this is not a social call."

On Friday morning, March 27, Wagoner, Henderson, and Ray Young arrived at Treasury to meet with the task force and review its findings before the all-important deadline on the loans four days later. Rattner asked to see Wagoner alone in his office. Henderson and Young waited together outside.

It didn't take more than a few minutes for Rattner to bring Rick Wagoner's GM career to an abrupt end.

"Look," Rattner said. "When we met a couple of weeks ago you very generously offered to step aside if it was in the best interests of the company, and unfortunately the conclusion of the administration is that it would be. I hope that's something you can live with."

Wagoner sat there a moment. "Okay," he said.

Then Rattner said that Henderson would be his interim replacement until a search for a permanent chief executive could begin.

"You shouldn't hire an outsider," Wagoner blurted out. "Alan Mulally called me with questions for two weeks after he got to Ford."

Rattner didn't get it. But he moved on. Henderson would be CEO, he said, and Kent Kresa, a longtime GM director, would take over Wagoner's other job as chairman. Would Wagoner please bring that up with Kresa at the board meeting being conducted by phone that afternoon? Wagoner said he would.

Then Wagoner made a comment that spoke volumes about how he perceived the fall of GM. "Are you going to fire Ron Gettelfinger too?" he asked.

That wasn't his job, Rattner said.

That was it. There was nothing more to say. The United States government had just changed the management of General Motors. Wagoner got up and left. A Treasury aide walked him back to where Henderson and Young were waiting. "Are you okay?" Young piped up. "Do we still have jobs?"

"No," said Wagoner. "They asked me to step aside. They want Fritz to be interim CEO."

The three of them just stared at one another. Then, as if nothing had happened, they went straight into the task force briefing on the president's upcoming auto speech. Wagoner sat stone-faced throughout it all, never saying a word.

After the meeting, Wagoner called Steve Harris in Detroit. "Here's the deal," he said. "I've been told I'm done. I've been asked to resign, and Fritz is going to replace me."

Harris listened in silence.

"This is going to be effective on Sunday," Wagoner said. "You need to think about what we need to say." Then he hung up.

At the same time, Henderson got a call on his cell phone from Rattner, asking him what he thought about being the new chief executive of GM.

"Thanks for your confidence in me," Henderson said. "But don't make me an interim. This company needs leaders.h.i.+p. You can do whatever you want with me. But don't have an interim CEO-because if you do, we're never going to make it."

Rattner said he'd think about it. Then he fielded an angry phone call from George Fisher, GM's lead director. "I think you're doing most of the right things," Fisher said. "But there's one thing I disagree with, and that's taking Rick out." Later, Rattner had a tense conference call with the rest of the GM board. And after that unpleasantness, he went back to work, girding for a long weekend of preparations for the president's speech on Monday, March 30.

Wagoner, Henderson, and Young rode to the D.C. airport in silence to catch their Northwest flight home. Henderson was glad n.o.body spoke in the car. "It was better that way," he said. "It was better just to stay quiet and be with him." But when they got to the terminal, Henderson needed to do something to cut through the gloom. "I'll tell you what, Rick," he said brightly. "I'll buy you a beer." So they sat together in the airport bar, the three of them drinking beer, old colleagues comforting a friend who had just lost his job. They even laughed a little. "They just had a different agenda," Henderson said to Wagoner. "It was out of their playbook. It didn't matter how long you had been there. You were going to get fired."

Wagoner just looked at him and nodded-tired, disappointed, and sipping his beer.

When their flight arrived in Detroit, they got off the plane together and began walking down the long airport concourse. Then Wagoner picked up the pace and strode ahead, carrying his briefcase, alone with his thoughts. About twenty yards behind him, Henderson and Young were deep in animated conversation, trying to figure out what was going to happen next.

Over the weekend, Wagoner talked to some GM directors and a few of his closest friends in the company. The board formally accepted his resignation and named Henderson the new chief executive, which was how the government preferred it be handled. (The "interim" tag was dropped.) At one point Wagoner called Harris, very upset, saying he wanted to get Rattner on the phone and tell him "to stuff it." Then he calmed down and called again. "I'm going to come in on Monday," he said.

Harris was aghast at the idea of the just-fired CEO walking into the Renaissance Center on Monday morning. "I can't imagine you coming in," he said nervously. "I can't imagine you wanting to be here." Finally Wagoner agreed. He wouldn't come in, even though he'd like to pack up and see everybody one last time.

But he did attend to one last duty. On Sunday, all the General Motors executives around the world, vice presidents and higher, dialed into a scheduled "senior leaders.h.i.+p" call. Wagoner was patched in at the start. "I've appreciated all your support," he said. "And I know you'll do a great job for Fritz."

Then he hung up, and Henderson took over the meeting.

Chapter Thirty.

President Obama called Jennifer Granholm on Sunday night, March 29, while she was in the governor's mansion in Lansing, Michigan. Obama was reaching out to her and to members of Congress on the night before his speech about GM and Chrysler. Granholm listened carefully, and then respectfully offered her perspective.

"People have to hear that you understand what this means to us," she said. "We need to hear that one way or another, you will not allow this auto industry to fail. Please, we need that."

"Believe me, I get it," Obama told her. "I've worked with the steel communities. I understand how devastating it's going to be."

At 11:07 A.M. on March 30, the president spoke live on national television from the White House. He talked about the pain of the recession and the failures of the American auto industry, which had lost four hundred thousand jobs in the past year alone. He singled out Michigan, where one in ten residents was out of work, the highest unemployment rate in the country. The problems of Detroit, he said, had been building for decades. Now was the time to solve them.

"We cannot, and must not, and we will not let our auto industry vanish," he said. "This industry, is like no other-it's an emblem of the American spirit, a once and future symbol of America's success. It's what helped build the middle cla.s.s and sustained it throughout the twentieth century. It's a source of deep pride for the generations of American workers whose hard work and imagination led to some of the finest cars the world has ever seen. It's a pillar of our economy that has held up the dreams of millions of our people. And we cannot continue to excuse poor decisions. We cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars. These companies, and this industry, must ultimately stand on their own, not as wards of the state."

The government would give General Motors and Chrysler one final opportunity to restructure and survive, he said. But their viability plans were not sufficient to warrant more aid now. They had to do much more. The president spelled out the terms. GM had sixty days to cut enough jobs, brands, dealers, and models to be profitable, and reduce its crus.h.i.+ng debt and liabilities. He also said that Rick Wagoner was "stepping aside," and that a majority of the GM board would be replaced. These actions were necessary, he said, to infuse "fresh thinking and new vision" and to qualify the company for enough working capital to keep operating during its last-gasp overhaul. This was a lifeline, not a government takeover-at least not yet. "Let me be clear," the president said. "The United States government has no interest in running GM."

His conditions were much tougher for Chrysler, which was now arguably the weakest major car company in the world. Chrysler had thirty days to join up with Fiat, dump its debt, get union concessions, and, above all, form a plan to replace its truck-heavy lineup with more fuel-efficient cars. If Chrysler made it, another $6 billion loan would be extended. The terms revolved around a Fiat deal; Chrysler wasn't getting another dime from Was.h.i.+ngton without a partner.

Then the president broached the subject that sent s.h.i.+vers through all the auto towns in America-bankruptcy. If it was necessary to use the Chapter 11 process to speed these transformations, he would not hesitate to order it. Obama also unveiled broader rescue efforts for the entire industry, including using federal funds to help auto finance companies extend car loans, offering tax credits to consumers who traded in old models for new and more fuel-efficient ones, and speeding recovery funds to impacted communities. Putting the auto industry back together was now an integral part of the national economic agenda. This was the moment when the harsh reality of Detroit's precipitous decline was driven home to the entire nation. Two presidential administrations had stepped up now to keep these pillars of the domestic industry alive. The damage was widespread and substantial. But the question was whether these beaten-down, sputtering corporations had the heart and the strength to rebuild and march into the future.

Sergio Marchionne was watching the speech from a meeting room in Turin when he heard the president talking about Fiat. "What the f.u.c.k?" he said. "What the h.e.l.l? The president of the United States is making reference to a bunch of schmucks like us?" It really hit him. He had wedged a good-and-getting-better Italian car company into the middle of the biggest industrial restructuring in U.S. history. Obama had said it: without Fiat, Chrysler had no hope.

It was a powerful negotiating tool. Marchionne was flying to Was.h.i.+ngton that night to start bargaining with Steve Rattner, Ron Bloom, and Bob Nardelli. Soon after, he would start talks with Ron Gettelfinger. However the deal was structured, he was not paying a penny of Fiat's money for control of Chrysler. And if he was going to run it, he would call the shots. His deputies were used to Marchionne's slightly manic, extremely demanding, and effective leaders.h.i.+p. They didn't call him "the boss" for nothing. Marchionne had turned Fiat from an also-ran into one of the most solid carmakers in Europe. And he was ready, willing, and able to take over Chrysler. It was a blank canvas he could fill with well-built Fiat cars and engines. How could he not make it better? "I am a conduit," he said, "for change."

And it was the end of the line for Cerberus. Steve Feinberg had indicated to Treasury that his firm was willing to have its 80 percent stake in Chrysler divided up and given away to save Chrysler. Fiat would get a piece, and then another slice would go to the union for the health care trust. And if necessary, the government would own part of Chrysler to secure its interests after the company went into its seemingly inevitable bankruptcy.

Nardelli badly wanted to meet the nearly impossible conditions the task force had set for Chrysler to avoid Chapter 11. Feinberg tried to tell him the game was pretty much over. Fiat was taking charge. It was only a matter of time. "Bob, there are a lot bigger things going on here than us," he said. "We've got to line up and help the country. I think we could turn this thing around. But Fiat can do it faster." Nardelli couldn't help feeling he had failed in Detroit before ever getting a real chance to succeed. "I've got really mixed emotions here," he said. "I desperately want Chrysler to be successful. We haven't been sitting on our rear ends. We took out $5 billion in fixed costs. We had our heart and soul in this thing."

Fritz Henderson paced the stage in the Renaissance Center briefing room. This was his first press conference as chief executive, and his nerves were jumpy. He talked too fast and his mind raced from question to question, anxious to get back upstairs and into the endless work ahead of him. The roomful of reporters kept circling back to one issue: Was GM going bankrupt?

"Whatever it takes, we will get the job done," he said. "We will do it out of court, or we will do it in court."

GM had two months to achieve what it had been unable to do for twenty years-get into fighting shape. Some of the president's conditions were possible to meet. Others were not. Henderson had already accepted that he would go down in history as the CEO who led General Motors into bankruptcy. Wagoner wouldn't or couldn't do it. But Henderson was fully engaged.

The Obama administration did not really see Henderson as a long-term leader. Every executive in the company was considered tainted, part of the reviled GM "culture" that had gotten the government into this mess. But for now, he was entrusted to carry out Treasury's bidding. Rattner saw Henderson as a significant upgrade over Wagoner. "If we said to him, 'Faster and deeper,' he said, 'I get it,'" Rattner noted. "He was willing to be more of a team player." The task force chief wondered why anyone even cared that Wagoner had been tossed. "To me it was a no-brainer," he said. "How do you keep a CEO who lost $45 billion in fifteen months and gives you a plan to turn around the company that doesn't make sense?"

Henderson had known for a long time that the numbers would never add up for GM. Who were they kidding? It was as if GM was playing with Monopoly money when it promised to put $24 billion into the union health care trust, or when it kept blowing billions every quarter buying out workers and paying Delphi's legacy costs. It was all about self-preservation now and keeping GM alive. Wagoner was right about one thing though: the very thought of General Motors liquidating into the weak economy like a ma.s.sive oil spill brought swift action in Was.h.i.+ngton.

And once the president set the new sixty-day deadline, everything accelerated. A team of Treasury staff and task force personnel, led by the hardheaded banker Harry Wilson, parachuted into the Renaissance Center and would remain encamped there until GM had a new viability plan.

Henderson committed himself to complete cooperation with the federal fixers. He called together all of his senior executives-Gary Cowger with the plants, Troy Clarke in North America, Mark LaNeve in sales and marketing-and instructed them to do everything they could to help Wilson and his people carve up GM into a drastically smaller company. And it would be a b.l.o.o.d.y operation. Four brands would go away for sure: Pontiac, Saturn, Hummer, and Saab were history. At least one thousand dealers were slated for extinction. There would be more plant closings and considerably more job losses.

How management expected to run an auto company in the interim was never talked about. GM would spend several months in virtual hibernation, waiting for its financial freeze to thaw. So many plants were idled anyway, sales were pathetic, and the product pipeline had slowed to a trickle. By mid-April, Treasury officials directed GM to prepare for a "surgical" bankruptcy. Two weeks later, Henderson laid out the game plan. The company would produce 30 percent fewer models, cut twenty-three thousand more jobs by 2011, and close sixteen manufacturing plants within a year after that.

And the final price tag of the bailout was starting to come into focus.

GM had soaked up more than $15 billion in federal loans, and it required at least $11 billion more to jump-start its recovery. In exchange, Henderson and the lame duck board of directors proposed to give the government a 50 percent owners.h.i.+p stake, with the UAW and bondholders sharing the rest. All the shareholders' equity would be wiped out in Chapter 11. If the new transformation plan was accepted by Obama's watchdogs, GM would emerge from bankruptcy with the U.S. taxpayer as its majority owner.

Chrysler's banks tried to muscle the federal government but to no avail. Rattner had all the leverage. If JPMorgan Chase and the other lenders wanted to force Chrysler into liquidation and try to recover their money that way, good luck. By late April, the Treasury Department was offering $1.5 billion to the banks to retire almost $7 billion in loans. The banks were crying foul. But what recourse did they have? The government was not only a partic.i.p.ant but also the referee and the promoter of the multilevel tug-of-war going on between Fiat, the union, Chrysler's lenders, and, to a lesser extent, Cerberus.

The most heated negotiations were the face-offs between Marchionne and Gettelfinger. The Fiat chief executive wanted megaconcessions from the union, including an unlimited number of $14-an-hour workers to replace the top-tier wage earners. At one ugly session, he lectured the union president about accepting a "culture of poverty" to sh.o.r.e up Chrysler's sick bottom line. Gettelfinger's response was to get up without a word and leave. He did that several times with Marchionne, letting the Fiat boss trade profanities and insults with General Holiefield. "Do you think I'm f.u.c.king stupid?" Marchionne yelled. "We need to come up with a compet.i.tive wage rate and structure here!"

Gettelfinger was not about to be bulldozed by yet another self-proclaimed Chrysler savior. "I believed the Germans when they came in," he told Marchionne. "Then I had no choice but to support Cerberus. You're the third guy saying you're going to save it. Why should I believe you?"

Marchionne understood completely. He knew he had a lot to prove. His tone changed abruptly. "I'm telling you that deep down, I know how to run a car company, not like that nonsense at Cerberus," he said. "I may be lousy at a lot of other things. But I know how to run a car company."

By late April, the two sides had reached a shaky truce. Gettelfinger would not back down on open-ended pay cuts, but he was resigned to taking potentially worthless Chrysler stock to fund the bulk of the health care trust. The VEBA would, incredibly, become the majority owner of the entire company, with a 55 percent stake. While it wouldn't have commensurate voting power on the new board, the symbolism was rich. Chrysler couldn't afford to pay the medical bills of its 170,000 retirees-so they got t.i.tle to the business instead.

The banks howled in protest at what they branded favoritism toward the UAW. As secured lenders, they had expected to get top priority in these high-stakes settlement talks. But as Ron Bloom so succinctly put it, Chrysler needed workers to build cars, not banks. The four biggest banks, who together held 70 percent of the loans, capitulated to Rattner's terms and agreed to accept a $2 billion payment to retire all the secured debt. But some of the forty-six lenders-a group of hedge funds and private investment firms-were holding out for more. To appease them, Treasury sweetened the offer by $250 million. Then a tense ninety-minute deadline set on April 29 pa.s.sed without agreement. The government held firm. No more bargaining. The last offer was yanked off the table.

On April 30, President Obama forced Chrysler into Chapter 11, making it the first major American auto company to seek bankruptcy protection since Studebaker in the 1930s. It was a stark, sobering moment for an industry that had been on the brink for so long. The filing in federal court in New York was the sixth-largest bankruptcy in U.S. history-and another grim chapter in the saga of the nation's third-biggest automaker. Daimler hadn't wanted it. Cerberus had been unable to fix it. And now Chrysler was bust. The employees in Auburn Hills and at plants across the country had been holding their breaths, hoping that a last-minute rescue was at hand. But time had run out.

"It seems like an ugly word-'bankruptcy,'" said Chris Whiteman, an engineering supervisor at the Chrysler tech center. "It puts a lot of doubt in people's minds." Even so, there was a stubborn, seen-it-all streak in Chrysler's workers. They'd been counted out more than once before. And they would roll with this punch too. "You have to feel okay with it," said Frank Dusevic, a line worker at the Warren a.s.sembly plant, "because you have no control over it."

For Obama, bankruptcy was the most pragmatic, sensible option at hand. "This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's revival," he said. There would, of course, be more pain-eight more plant closings, up to another ten thousand jobs vaporized, nearly eight hundred dealers.h.i.+ps shut down. But Chrysler cruised into Chapter 11 with its exit strategy well mapped out. The UAW and Fiat negotiations had established the parameters of the reorganization. The union health care trust would get its 55 percent stake. The lenders had a framework of a deal in place to retire the debt (despite a vain legal fight by a few holdouts).

Fiat grabbed 20 percent owners.h.i.+p to start but could b.u.mp it to 35 percent and higher over time by hitting targets for American-made small cars and expanding exports of Chrysler products. And Marchionne was poised to take over as Chrysler's new CEO, putting him in a league with Carlos Ghosn as the only executive in the world to oversee two automakers at the same time. He couldn't wait to get under the hood of his latest reclamation project. "We're married to the d.a.m.n thing now," he said about Chrysler. "And we are going to make it work."