Overhaul (22 page)

The President was mostly listening, although at one point he observed that being tough with Chrysler would be a lot easier if the government hadn't just bailed out the banks, particularly Citigroup.

After perhaps forty-five minutes, the key points had been made. Larry turned and asked me to give the President my assessment of whether the Chrysler-Fiat alliance could be completed successfully. This was another question he had flagged for me beforehand; my caveats about the uncertainties of dealmaking had registered and he wanted Obama to hear them. "I would put the probability at 50 percent, Mr. President," I said, "but in my experience, deals generally get worse, not better."

That seemed to put a damper on the group and there was a pause. The President looked around the room and said, "Does anyone else have anything to say?" No one did. The President rested his chin on his hands for a few seconds. Then he looked up and said, "I've made my decision. 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 turned to me and Ron and added, "I want you to be tough and I want you to be commercial." We took that to mean that we should insist that all of our conditions be met in a way that was prudent from the taxpayer's standpoint.

Not wanting the Chrysler discussion to end on such a down note, Deese—who is anything but shy—piped up from the couch. "I think it is worth recognizing that there are positive attributes associated with the Chrysler deal if it gets done," he said. "It's not all negative, including the fact that while Fiat hasn't committed money, they have committed themselves with their technology, including a commitment to build a forty-mile-per-hour car in the United States." People began to laugh, and it took a couple of beats for Deese to realize what he'd said and start laughing along. Building a forty-mile-per-gallon car would indeed be significant—but a forty-mile-per-hour car probably wouldn't improve Chrysler's prospects very much.

I found President Obama's decisionmaking style to be consistent with his "no drama Obama" reputation and on a par with the best CEOs I had spent time with on Wall Street. In addition to having done his homework, he remained engaged on a subject far from his comfort zone and probably equally far from his zone of interest. He was decisive when his advisers were divided, supportive when they were not. Perhaps most important, he showed courage in making a tough, politically risky decision.

And notwithstanding the disagreement over Chrysler, those more expert in presidential decisionmaking than I—including Chrysler opponents such as Diana—felt that the process worked well. Both sides got their say and the President decided. For my part, I was also somewhat shocked to realize that I was, at fifty-six, the oldest person in the room.

The President accepted our other recommendations without comment, and after a brief discussion about preparing the public announcement for the following Monday, March 30, the meeting adjourned. In hindsight, it is remarkable that our proposed management changes—including the ouster of Rick Wagoner as chairman and CEO of GM—never came up. Within a few days it was to figure large in our lives.

Larry had raised the management question with us early on and in his Socratic way, probing our assumption that Wagoner had to go. But Larry had never seriously questioned the need for new management; for him, it was a matter of who, when, and how. Initially Larry was of the view that, for the sake of continuity, Wagoner should stay until he'd seen GM through the traumatic bankruptcy. To us that seemed a terrible idea. We argued that planning and executing the restructuring was effectively the first chapter in GM's future, and therefore it was critical to have a new CEO who would "own" the result. In due course, Larry came around to our view.

We never talked about who should do the firing. Throughout its rescue operations, the Obama administration had wanted to minimize at least the appearance of intervention in the private sector. Had I thought to flag this question for Larry, he might well have suggested a quiet word with trusted GM board members. Alternatively, he might have asked that Tim do the firing, as Hank Paulson had dismissed the heads of Fannie Mae and Freddie Mac. (None of the previous dismissals had created any fuss.) But when the question never came up, I simply concluded that this unpleasant task was up to me.

So I'd made preparations on the assumption that the President would approve our plan and that I'd have to inform GM right away. We'd asked Rick and his colleagues to come to Washington the next day on the pretext of being briefed on the President's upcoming announcement. As part of their itinerary, I'd scheduled a private meeting for myself with Rick as soon as they arrived at Treasury. I knew that the GM board held a conference call every Friday at noon during the crisis, and I wanted to tell him before then.

While inscrutable, Rick turned out not to be oblivious. He had divined from our previous conversations that his future was in doubt. That morning, he spoke to George Fisher, GM's lead director, with whom I had served on the board of Brown University. "I had good experiences with Steve at Brown, and Steve would know that it was in the government's best interest to keep you around," Fisher reassured Wagoner, emphasizing his view that GM was finally producing more realistic projections and plans.

Promptly at 9:15, Rick arrived and took a seat on the red fake-leather couch in my office. I took a chair from my conference table and placed it opposite him. I went straight to the point. "In our last meeting," I said, "you very graciously offered to step aside if it would be helpful, and unfortunately, our conclusion is that it would be best if you did that." He took the news impassively and at first did not say a word. I later learned that coming on the heels of the Fisher conversation, he was devastated.

I told him of our intention to make Fritz the interim CEO while we looked for a permanent replacement. Rick reacted to that, cautioning me against hiring an industry outsider to run General Motors. "Alan Mulally called me with questions every day for two weeks after he got to Ford," he said.

Next we talked about the GM chairmanship. I hadn't succeeded in finding an outsider for the job and the day before had suspended my search. Instead I'd pored over the list of board members in hopes of identifying a director who could make a credible interim chairman. Kent Kresa stood out. I did not know him, but he had the right pedigree. He'd been successful as chairman and CEO of the defense contractor Northrop Grumman and had served on the GM board since 2003, long enough to know the company and not conspicuously overlong. Larry, it turned out, knew him slightly from a foundation board on which both had served and had a good impression. I'd made a couple of calls to friends who also gave positive feedback. So now I asked Rick if he would be willing to see if Kresa would step in as interim chairman for a couple of weeks. Rick concurred and graciously agreed to ask him.

As this awkward conversation drew to an end, Rick suddenly asked, "Are you going to fire Ron Gettelfinger too?" I replied that I was not in charge of firing the head of the UAW. There wasn't much more to say. I offered to let Rick meet alone with his colleagues, who were waiting upstairs in a conference room to start the briefing session, but he said no, we should stick to the schedule. (I don't know when he planned to tell them.)

A long walk together through the halls of the Treasury would have been uncomfortable for us both, so I asked my assistant to help him find the meeting room while I gathered my colleagues, and made sure to give them a head start. But my assistant was new to Treasury, and it took them almost that long to find the conference room. When Rick walked in, Ray Young half jokingly asked his boss, "Do we still have jobs?"

"You do," said Wagoner. Though he hadn't planned to, he told them what had just occurred—which is how Fritz Henderson learned he was to become interim CEO. Rick had barely delivered the news when Harry, Ron, and I arrived.

We had no way to know what we had walked in on, and my colleagues and I plunged into our briefing about the President's forthcoming speech. Henderson, who had suspected the management change was coming, was now dwelling silently on the word "interim." "This is not going to let me be effective," Fritz thought. Then he put the worry aside and forced himself to pay attention to what we were saying about the deadlines and conditions that the President was about to impose—deadlines and conditions it would be his responsibility to meet. "The probability of bankruptcy just went up a lot," he realized as we described the plan.

But Ray—whose lack of common sense seemed limitless—did not get the message. As we finished, he fretted aloud that GM would have to reconsider the timing of its bond-exchange offer. Harry gently suggested that a lot of things at GM would now have to change, but Ray still wasn't getting it. I couldn't help myself and snapped, "It should be obvious that the bond exchange is the least important thing we have to worry about." Fritz rested a hand on Ray's forearm and quietly said to him, "We'll come back to this."

Rick said not a word ("He looks shell-shocked," Harry thought), and the uncomfortable meeting soon came to a merciful end. After I got back to my office, still unaware that Rick had delivered the news, I waited what I thought was a reasonable interval for him to do so and then called Fritz's cell phone.

"What do you think?" I asked.

"Thank you for your confidence in me," Fritz replied. "Let's talk about one thing which I don't think is right—making my title interim CEO. You can fire me any time you want, but at least give me a chance to succeed."

"Let me think about that," I said.

Fritz hung up, thinking, "Steve gets this, but he's got to go through a bunch of hoops to change this, because the decision has already been made that I would be an interim and that would have to get undone." When he didn't hear back from me right away, he was even more sure of his initial instinct. In reality, my bosses didn't much care whether Fritz was called interim or not, so I didn't need to clear it with them. While I understood Fritz's concern, my hesitation about agreeing to his request on the spot reflected my inexperience with such matters and my desire to consult my new guru Jack Welch before responding. When I caught up with him, his reaction was instantaneous. "Fritz is right," Jack said. "If he's called interim, he won't have a chance."

That afternoon, I received a call from a furious George Fisher, calling in his capacity as GM's lead director. (Like most Fortune 500 companies, GM had a lead outside director in an effort to provide a counterweight to the combined chairman and CEO.) George was a gracious man who had been CEO of both Motorola and Eastman Kodak. Unfortunately, as his conversation with Rick that morning indicated, as lead director he had been pretty much blindly supportive of Rick. "We are absolutely convinced we have the right team under Rick Wagoner's leadership to get us through these difficult times and on to a bright future," Fisher had said in August 2008, immediately after GM announced a $15.5 billion quarterly loss. Now he lashed out at me for firing Rick. "I think you are doing a lot of right things, but I think this is wrong," said Fisher, who privately found our actions "abhorrent."

He also felt—with some justification—that the selection of Kresa as interim chairman was a slap in his face. I had expected this and had deliberately not asked Kresa or anyone else to take Fisher's place as lead director, which I pointed out. "I noticed that and appreciated it," Fisher said, calming down as he spoke. Of course, with Kresa as a nonexecutive chairman, the lead director's role had been rendered moot.

Shortly afterward, I got a call from Bob Joffe, the tall, bespectacled sixty-five-year-old former presiding partner at the law firm of Cravath, Swaine & Moore, who had been advising the GM board for many years. Bob was a good friend; we had labored together in the political vineyard as ardent Democrats. He was also a terrific lawyer and counselor who conveyed gravitas and judgment. "The board is pretty upset," Bob reported. "They feel that you've taken away their most important responsibility," by which he meant the hiring and firing of the CEO. There was talk of a mass resignation, Bob said. "I think it would mean a lot if you would be willing to get on the phone with them tonight," he suggested.

By the time I joined the conference call that evening, the GM board members weren't as enraged as I'd feared. Still, I was glad not to be with them in person. There were a number of hostile questions, particularly from some of the longest-serving directors who had been most complicit in GM's decay. I explained that in bringing our decision about Rick to him first, I was trying—perhaps erroneously—to give him the dignity of presenting his departure to the board himself, in whatever context he chose. After about a half hour, the questions petered out and the board excused me to continue its deliberations.

Later, Bob Joffe called to say that my willingness to let the directors vent had been effective in quelling any nascent mutiny. I was relieved. I had been trusted to implement decisions that would normally be executed at much higher levels of the government. A mass resignation on the eve of the President's speech would have been more than an embarrassment; it could have crippled the auto rescue effort and been a particular disaster for me. Fortunately, all of the directors agreed to stay on through the restructuring, and several later told me privately that we had made the right decision.

I called Fritz the following day to let him know that "interim" would be dropped from his new title. It wasn't until much later, though, that he told me the story of his flight home to Detroit on Friday—a somewhat surreal journey during which he and Rick sat next to each other, one row away from a well-known automotive journalist. They didn't exchange a single word about the day's events. When new CEO and former CEO debarked at the sparkling terminal where Team Auto had arrived just eighteen days earlier, Rick went off silently with his security guard. He and Fritz would never have a conversation about what had transpired; from then on in public, Wagoner maintained an aura of silence and impassivity.