“The state cannot save all companies”


new York Steven Rattner has saved the US auto industry before. After the financial crisis ten years ago, he headed the task force for the rescue of General Motors and Chrysler for the then US President Barack Obama and earned the unofficial title of “Auto-Tsar”. He is currently closely following the Trump administration’s relief efforts in the corona crisis. However, Michael Bloomberg’s current asset manager does not consider it necessary to rescue the auto industry again.

“I don’t think the auto industry will be saved. And I also see no reason for special treatment for an individual industry, ”said Rattner in an interview with the Handelsblatt. “Unlike the post-financial crisis, all industries are currently equally affected by the corona crisis. The state cannot save all companies, ”he is convinced. If it had been up to him, the airlines would not have gotten any money either.

Unlike after the financial crisis, car companies are currently not facing bankruptcy. “Back then we tried to position the companies so that they could survive the next crisis,” says Rattner about his time as an auto-tsar. Today, the corporations would have less debt and enough liquidity to be profitable even with significantly lower production numbers.

Even before the plant closings caused by Corona, automakers worldwide were in a difficult phase of change. After all, topics like electromobility, autonomous driving and ride sharing would have presented them with enormous challenges even before the virus. “They will get through the virus recession to some extent and then face the same challenges as before,” the economist points out.

In fact, the situation at American automakers is no longer as rosy as it was a few years ago. In the past few years, thanks to the high demand for high-margin SUVs and pickups, they were still able to make huge profits. But it was mainly Ford and Fiat Chrysler who missed important future technologies.

It looks particularly bleak at Ford. Under the leadership of Jim Hackett, the group has been unsuccessfully working on restructuring for two years. GM boss Marry Barra, on the other hand, already announced in 2018 that she would switch production entirely to electric cars. Since her plan also included plant closings and layoffs, she felt Trump’s anger. These days, the US auto companies mainly manufacture ventilation machines, masks and protective suits.

Rattner doesn’t think much of scrapping premiums

Rattner doesn’t believe in the scrapping premiums that German carmakers are currently demanding. “We also used it in the United States at the time. But we probably only influenced the timing of the car purchase and not the demand itself, ”he looks back today. He believes that because of unemployment, Americans have long lost the desire for new cars.

Rattner today heads the Family Office Willet Advisors, which invests the private assets of the media entrepreneur and former Democratic presidential candidate Michael Bloomberg as well as the funds from the Bloomberg Foundation. For the time being, he is preparing for a long period of weakness in the US economy. “Companies in all industries are reducing their investments and are trying to estimate how many employees they really need after the shutdown,” he says. Unemployment will therefore remain very high for a long time.

That is also a lesson from the financial crisis: it goes downwards significantly faster than upwards. The recovery takes time. In 2008 it took 25 months to bottom and 51 months before the economy climbed from the low back to the pre-crisis level.

In view of the prescribed shutdown, the corona crisis led to a significantly faster slump. This is also shown by the unemployment figures: Around 22 million Americans have been applying for unemployment benefits since mid-March. The shutdown recession destroyed the same number of jobs that have been rebuilt since 2009 in just four weeks.

After all, the Trump administration was keen that a large part of the $ 2.2 trillion aid package did not sink into banks and large corporations, but secured jobs or benefited the unemployed. The unemployment benefit has been increased significantly for the next four months, so that some low-income earners are now getting even more money than before. $ 350 billion went to small and medium-sized businesses.

But the package has its weaknesses: there are major delays in unemployment applications. And only those who have a social security number are eligible. The many illegal immigrants who are particularly hard hit by the crisis are not entitled to this. Loans for small and medium-sized businesses have created chaotic conditions among the banks, which distribute the funds covered by the government.

Further help in conversation

Rattner firmly believes that there will be further aid programs. “The government will do whatever it takes to support the economy,” he is convinced. Discussions include additional help for small and medium-sized companies in the amount of $ 310 billion, as well as grants for hospitals that could be passed on Tuesday.

But the programs will by no means help everyone. Democratic senator and former presidential candidate Elizabeth Warren is demanding higher wages for nurses, supermarket workers and other jobs where people risk their health to keep the country running. It is unclear whether there is sufficient political support for this in the republican-led senate.

However, Rattner, whose wife Maureen White is an influential fundraiser for the Democratic Party, warns against placing high expectations in the stimulus packages. “We all want wages for low earners to rise. But you shouldn’t try to solve too many problems with these government aids at once, ”he points out. That would only further delay decision-making in politics.

There is hope among Democrats in particular that the crisis could create readiness for long-term changes in the US economy. Above all, Warren and Sanders advocate a stronger social network with statutory health insurance, continued sick pay and higher minimum wages and refer to the comparatively strong social networks in many European countries.

The pandemic shows the division between poor and rich in the country particularly clearly. If you lose your job, you also lose your health insurance. Millions of Americans are also not insured at all because they work part-time or work as part of the so-called “gig economy” as Uber drivers or delivery men on their own account and therefore do not have enough money for health insurance. For fear of high costs, many Americans don’t dare to see a doctor – which is particularly dangerous in a pandemic.

Reluctant to invest

The November presidential election will show whether the appetite for major changes is strong enough. The Democrat Rattner is “not too optimistic.” The focus at the moment is to prevent the most serious economic damage. “Agreeing on major structural changes is extremely difficult. Especially if the Senate and the House of Representatives are not majority-run by the same party, ”he says.

As an asset manager of one of the richest men in the country, he is currently rather cautious about investments. “There were a few good opportunities on the stock markets in March, but prices recovered surprisingly quickly, you could almost say faster than justified,” said Rattner. With private equity investments, the prices have not yet fallen low enough. “The sellers still ask the prices from before the crisis, but the buyers want a clear discount.”

Michael Bloomberg, who will use most of his $ 54 billion fortune for charitable purposes, has already given $ 40 million to help fight the virus. Other billionaires such as Microsoft founder Bill Gates and Twitter boss Jack Dorsey also donated. But that would only be the beginning. “Solving the crisis is of course the government’s job first, but we’re getting to a point where the wealthy in this country need to do more,” says Rattner.

They should also be prepared for the property tax debate that leftist presidential candidates Warren and Bernie Sanders have called for to return. “The government deficit will be so huge that we will have to find new tax revenue. But first of all we have to get through the crisis. “

More: The corona crisis could destroy Trump’s election campaign. A guest comment by Josef Braml.


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