NEW YORK (Bloomberg) -- General Motors Co. and Chrysler LLC will lead automakers to “gushing profits” when annual U.S. sales reach 15 million vehicles, said Steven Rattner, the former head of the federal government's auto task force.
GM reduced costs and liabilities during its 2009 bankruptcy proceedings, allowing the company to make a profit when fewer U.S. vehicles are sold, Rattner said today on Bloomberg Television's “Surveillance Midday with Tom Keene.”
“This industry has been restructured to make money,” Rattner said. At 15 million vehicles a year, “they will be gushing profits.”
The auto industry is recovering a bit slower than expected and eventually will return to a pace of 15 million a year, Rattner said. U.S. automakers in September sold vehicles at a rate of 11.8 million, up from 9.4 million a year earlier, according to researcher Autodata Corp.
A pace of 15 million vehicles is needed “simply to accommodate new drivers and the aging of the fleet,” Rattner said. “It will happen, it's only a question of when.”
Rattner, 58, led President Barack Obama's auto task force from February 2009 until July last year, after GM emerged from bankruptcy backed by $50 billion in government aid. He has since written a memoir called “Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry.”
GM's unwanted businesses in bankruptcy, known as Old GM, today won conditional approval for the largest manufacturing reorganization in history, as a judge said the rights to a potential $1.5 billion in lawsuit proceeds would be determined later.
Rattner said today the slumping global economy will test U.S. companies and create a challenge for the auto industry.
“In the short term, I think we have a cyclical recovery, certainly the auto sector and elsewhere, but the global competition is not getting easier,” Rattner said. “It's getting harder.”
Under a cloud
Rattner, co-founder of Quadrangle Group LLC and the subject of state and federal investigations of corruption at New York state's pension fund, is near a settlement with the U.S. Securities and Exchange Commission, according to a person familiar with the matter.
The proposed accord includes a two-year ban from the financial industry and a $6 million fine, according to the person, who declined to be identified because the talks are private. In June, the SEC proposed a three-year ban, while Rattner suggested one to two years, a person with knowledge of those negotiations said at the time.
Because of the pending settlement, the Detroit Economic Club canceled a speech Rattner was scheduled to deliver before the group in Detroit next week.
Rattner, 58, arranged to retain Henry “Hank” Morris, the former chief political consultant to ex-New York Comptroller Alan Hevesi, as a placement agent and paid him more than $1 million in sham “finder” fees, according to the SEC and New York Attorney General Andrew Cuomo. Rattner also is accused of setting up a DVD distribution deal for a movie produced by the brother of a pension fund official.
In exchange, Quadrangle, a New York-based private-equity firm, obtained $100 million in investment commitments from the New York state Common Retirement Fund, said Cuomo, who resolved a probe of the firm in April for $7 million.