No Fooling? Rattner Found Poor Management at GM, Chrysler

(MoneyWatch)  Anybody who was shocked to find poor financial management within General Motors and Chrysler -- as former auto czar Steve Rattner says he was -- must not have been paying much attention to the U.S. auto industry.

Here's the first clue that maybe all was not right: none of the Detroit Big Three, including GM, Chrysler and Ford, could consistently turn a profit in the midst of the greatest decade for U.S. auto sales ever, a phenomenon that auto industry analysts called "profitless prosperity."

This general topic came up in a panel discussion last week at Columbia University. Panelist Al Koch said he was deeply troubled about GM's future ever since he first moved to Detroit in the early 1980s. Koch is no less a figure than the guy in charge of selling off the remaining assets of "Old GM," now known as Motors Liquidation Company.

"To me it wasn't a question of whether GM would fail, it was when GM would fail," he said. Koch is vice chairman and managing director, AlixPartners LLP, and?€? CEO of Motors Liquidation.

Meanwhile, Rattner gave an interview to Fortune, which in turn was picked up by the Associated Press, in which Rattner states he was shocked and appalled, or words to that effect, at how poor the financial management was at Chrysler, and especially GM.

Rattner also brings up the surprisingly arrogant attitude, under the circumstances, of GM's top management, which seemed more or less exclusively interested in fixing the blame on outside factors beyond their control, like the yen-dollar exchange rate, legacy UAW contracts, oil prices and the financial crisis.

This is also extremely familiar territory for anybody who has dealt with GM or its main competitors over the years.

"The challenge facing the industry is denial. Arrogant denial is a fatal disease," said another panelist at the Columbia confab in New York last week, Tim Leuliette.

Without singling out GM, he said, "Denial is stopping a lot of companies from facing a restructuring plan that's realistic to the environment." Leuliette is chairman, CEO and president of auto supplier Dura Automotive Systems.

Panel moderator Peter Brown, vice president and associate publisher of the Automotive News Group, was more blunt. Despite going in an out of bankruptcy, attitude-wise at GM, "Nothing has changed," he said.

"The guys at GM are still pretty much convinced they're the smartest people in the room, in whatever room they happen to find themselves," Brown said. In contrast, Brown said that under Fiat, Chrysler seems to recognize, "there's a new sheriff in town."

Rattner and the Obama Administration reacted to GM's attitude of denial by giving then-GM CEO Rick Wagoner his walking papers. The attitude may have been news to Steve Rattner, but it wouldn't have surprised even casual observers of the auto industry scene.

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