Obama Picked Wrong Advisers for Auto Overhaul, Gerstner Says
By Matthew Benjamin
June 27 (Bloomberg) -- Louis Gerstner, the former International Business Machines Corp. chief executive officer, praised President Barack Obama’s economic performance while criticizing the way the White House handled restructurings of General Motors Corp. and Chrysler LLC.
“Who did we pick to figure out how to fix the automobile industry? We picked two investment bankers,” Gerstner said in an interview with Bloomberg Television’s “Conversations with Judy Woodruff” airing today. “It’s sort of like asking the arsonist to run the fire department.”
In February, Obama named Steven Rattner, co-founder of private-equity firm Quadrangle Group LLC, as chief adviser on auto-industry issues, and Ron Bloom, a former vice president at investment bank Lazard Ltd., to advise his auto task force.
Gerstner, 67, said he didn’t question White House efforts to restructure failing banks and automakers. “They did the right thing,” said Gerstner, also a former chairman of Carlyle Group, the world’s second-largest private equity firm.
Gerstner also was supportive of the Obama administration’s fiscal stimulus and budgetary plans. “The spending programs they put in place, I think have been very appropriate,” he said.
The Obama administration is right to spend trillions to prevent economic and financial collapse, Gerstner said. “They learned from the major problems in the Depression that when you have this kind of deep economic downturn, you cannot spend too much,” he said.
Pressure on Dollar
Gerstner cautioned that it remains “uncertain” how the government can stop the spending “before we get tremendous pressure on the U.S. dollar, and therefore inflation pressure.”
He also expressed concerns about how quickly the government can end its ownership stakes in the automakers and banks and restore competition.
“The sooner the government gets out and turns over the management and the equity, the ownership, to private-sector people, the more comfortable I’m going to be,” he said.
Gerstner, who ran IBM from 1993 to 2002, said the problems that drove GM to a June 1 bankruptcy filing and necessitated about $65 billion in government aid are similar to those IBM faced in the early 1990s. Both firms, he said, became insular and lost sight of changes in the industry and among customers.
‘Looking Inside’
“GM has a culture of looking inside,” said Gerstner, who was an executive at American Express Co. and RJR Nabisco Inc. before joining IBM. “It denied the fact that customers really didn’t want the products they had. They wanted to stay with what they did.”
Gerstner, a longtime proponent of education overhaul, praised White House efforts in that area and said he’s “excited” about Education Secretary Arne Duncan.
“I’m as optimistic as I’ve ever been that we now have, in this administration, a leader in Secretary Duncan,” he said.
Gerstner said Duncan should consider reducing the number of U.S. school districts to “70 or 80” from about 16,000. The reduced number would represent “one for each state, one for each major city,” he said.
“I could not have changed IBM if I had 16,000 profit centers,” he said.
While the Obama administration hasn’t proposed eliminating any school districts, Gerstner said Duncan, who is overseeing distribution of more than $100 billion in education stimulus funds, may drive a “national transformation” of public schools.
Private Equity
Gerstner, who was Carlyle chairman from 2003 to 2008, said capital from private equity firms continues to play an important role in the economy.
“It provides a place for companies to go through transitions, important transitions, in a private environment where you can take a long time,” he said.
Gerstner said energy independence, the environment, education, Social Security and health care are the five issues most important to the U.S. If they aren’t addressed “we’ll be a second-rate nation by the middle of this century,” he said.
He praised Obama’s leadership on the issues.
“We now have a president who’s taking on every one of those and I am really excited about the prospects that maybe - maybe we’ll make some progress on some of these issues,” Gerstner said.
Asked if he had any interest in working in the administration, Gerstner answered: “None.” |
