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Why the Former Car Czar Is Lavishing Praise on the King of Bailout Capitalism

This is very nearly brain-warping: Time has named its 100 most influential people for 2011, and Fiat-Chrysler CEO Sergio Marchionne is on the list. And who did the write-up? Why, none other than erstwhile car czar Steven Rattner. Architect of the Detroit bailout, meet the master of bailout capitalism!

Have the mighty actually fallen?
You could always ask, as the U.S. government eliminates the car czar role and seeks to exit its remaining stakes in both Chrysler and General Motors (GM), why the man who ran the show is now penning 200-word squibs for a fading newsweekly.

But then you'd be overlooking the concise synergy that Rattner-on-Marchionne represents. Rattner's general reaction when he first looked at the financial and management status of Chrysler and GM in 2009 was absolute dismay.

In fact, Chrysler was such a basket case that the task force extensively debated whether it should simply be allowed to go down. Enter Marchionne, who deftly engineered a deal whereby Fiat, itself recently rescued from bankruptcy, spent no money to take Chrysler off the Treasury's hands.

But it gets even better
When Chrysler exited bankruptcy, the government provided more than $6 billion in financing to keep the assembly lines running. I think this is why Rattner truly admires Marchionne: the Fiat CEO leveraged the entire deal with... nothing, beyond his own reputation as the savior of Fiat.

Rattner's adoration of Marchionne is so great that his Time piece reads like a mash note:

Invariably cloaked in a black sweater and alternately charming and bullying, the Italian-born, Canadian-bred Marchionne, 58, swept into Chrysler with no matter too large or too small for his relentless focus. Symbolically, he moved the CEO's office from splendid executive-tower isolation to the fourth floor of the engineering building, elbow to elbow with key execs. Substantively, he overhauled Chrysler's tired product line.
Oo la la! Actually, Chrysler's product line wasn't that bad when Marchionne took over, and in any case, he's a money guy, not a car guy. But if anything Rattner understates the man's chutzpah: the auto industry has never seen anyone who can keep as many financial balls in the air as Marchionne -- nor keep seemingly everyone off balance, from the government to the banks to the media, while he executes a decisive plan.

Capitalism's guilt problem
Marchionne is a uniquely post-guilt capitalist. Even the likes of Rattner -- whose wings have been clipped by a scandal involving his old firm Quadrangle and the New York State pension fund -- can be chastened by business bets gone bad.

Marchionne, by contrast, truly saw crisis as opportunity. He had no cash, and really no access to money in the wake of the financial crisis, so he looked to the bailouts as his bank. The beauty of this is that the U.S. government was absorbing the risk. And if Chrysler and Fiat manage to make this all work, it will be the greatest example of a public-private collaboration in contemporary political and business history. Credit goes to the man who wasn't afraid to beg.

The penultimate phase in Sergio's plan
Marchionne has been working hard on refinancing Chrysler's remaining government debt. Today, he succeeded in setting Fiat up to take a majority stake in Chrysler prior to an IPO. From the Wall Street Journal:

Fiat SpA said... that it plans to boost its stake in Chrysler Group LLC to 46% from 30% once the U.S. auto maker repays its government loans within the next two months. The move will clear the way for Fiat to take a majority stake in Chrysler by the end of this year.

Fiat said it will spend $1.27 billion for the 16% increase once Chrysler repays the loans under a deal now being worked on by Sergio Marchionne, who is chief executive of both auto makers. Marchionne is securing commercial funding from a group of banks--which includes Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Citigroup Inc. (C) and Bank of America Corp. (BAC)--to repay the loans provided to Chrysler by the U.S. and Canadian governments during its 2009 bankruptcy.

Note the brand names that are jumping in to give Sergio even more money. Rattner has to be proud.


Photo: Chrysler-Fiat Media
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