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Can these men save Detroit?

By tapping both Steven Rattner and Ron Bloom to be the Treasury's point men on the auto bailout, the Obama Administration is hoping this odd couple can save Detroit.

By William D. Cohan, Fortune
February 25, 2009: 11:27 AM ET

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Bloom has a passion for advocating for the little guy.
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Bloom drives a "weathered" 1997 Taurus.

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NEW YORK (Fortune) -- When the Treasury Department announced on Tuesday that Steven Rattner, a New York-based financier, would be a counselor to the Secretary of the Treasury, one had to wonder what this meant for Ron Bloom, whom Treasury had tapped last week to be its Senior Advisor on the Auto Industry.

On paper, the two men have little in common except for the fact that they both worked as investment bankers at Lazard Freres, in New York, and neither one was named "Car Czar," a title that Rattner's name has been bandied about for ever since more high-profiled economic posts in the Obama administration were filled. Up until the Rattner news broke on Monday, Bloom had every reason to think that he was the administration's lead liaison to Detroit.

The simplest way to understand who the two men are, and the roles they might play in Detroit's future can be summed up by the cars they drive. Bloom, 53, drives a "weathered" 1997 Taurus. According to public records, Rattner, 56, owns a 2008 Lexus LS 460 sedan, a 2007 Audi S4 convertible, a 2006 Mercedes-Benz R350 sport-utility vehicle and a 2005 Lincoln Town Car.

One suspects the sole American vehicle in the Rattner stable is used to drive him from his Fifth Avenue residence to the Seagram's Building in midtown where the Quadrangle Group, a private equity firm he co-founded, is headquartered. Rattner has been known to fly his own private jet to the Vineyard; Bloom drove himself from his home in Pittsburgh to DC, where he is now based. Neither Rattner nor Bloom would comment for this story. (In full disclosure, I am an investor in Quadrangle Group's first fund and, for a time, reported to Rattner when he ran the Banking group at Lazard.)

The differences between the two men do not end at the curb. Rattner's "sprawling" apartment overlooks Central Park and the Metropolitan Museum of Art (where he is on the board). He has a horse-farm in North Salem, New York, in northern Westchester County, near his friend, New York City Mayor Mike Bloomberg, and is building a 15,575-square foot house on the water in Martha's Vineyard. Rattner has also made no secret of his desire to one day be Secretary of the Treasury. His wife, Maureen White, was the finance co-chair for Hillary Clinton's presidential bid and a former national finance chair of the Democratic National Committee.

What sets Bloom apart from Rattner is his frugality. He has little passion for making money, the Holy Grail for most of the species. Until recently, he called Pittsburgh home. In 1996, after six bountiful years as a founding partner of Keilin & Bloom, the investment banking advisory boutique he set up with Gene Keilin, another former partner at Lazard Freres, in New York, Bloom walked away from it all and took a job as the special assistant to the president of the United Steelworkers, one of his longtime clients. He had a major role in advising the steelworkers on the consolidation of the steel industry by billionaire financier Wilbur Ross, who in turn sold his International Steel Group for $4.5 billion to ArcelorMittal in 2005.

"Having tasted high-level deal-doing and significant pay days, he made a choice. He chose to make a sharp u-turn and work for the United Steelworkers for a white-collar salary," says Gene Keilin, "A lot of people would have gone the other way."

A man of the people

Bloom's passion was -- and remains -- to be an advocate for the proverbial little guy -- the steel worker, chassis assembler or jet pilot -- whose voice is often not heard -- let alone listened to -- in the hallowed halls of Wall Street power salons or in the corporate boardrooms where deals are cut and decisions are made that affect their lives. Bloom's entire professional career has been fashioned to redress that problem.

Bloom seems to come by his passions naturally. His father, Joel, was born in Brooklyn and held many jobs, including selling insurance and working for the Israeli defense ministry. His aunt was a teachers' union leader and a great uncle was a leader in the Hebrew bakers' union. Ron Bloom was born in Queens but grew up outside of Philadelphia, where his family had moved in 1969 after his father became director of the science museum and planetarium at the Franklin Institute.

After graduating from Wesleyan University in 1977, Bloom worked as a labor organizer. At the Service Employees International Union, one of the nation's largest unions, he came to the conclusion that unions lacked the technical skills to negotiate with management teams and their advisors at the bargaining table. "Unions were being backed into corners by companies and couldn't understand on a sophisticated level, the company's arguments," he once said. "Labor needed to be armed with the equivalent skills."

His new mission was to learn the argot of Wall Street. Lazard hired Bloom soon after he graduated from Harvard Business School. He wanted to work at Lazard because at HBS he had been impressed by the way that Keilin advised the steelworkers who bought Weirton Steel, in Weirton, West Virginia.

"He recruited himself to Lazard," Keilin allowed. "He wanted to come to Lazard partly because of Felix [Rohatyn, the firm's senior partner] and partly because of the work we were doing with the unions. Unlike most young bankers, he was fully formed by the time he got here. He worked really hard. He came as a very strong technical analyst. He understood valuation and financial instruments. The fact is he was a 24x7 guy long before that term was ever coined."

One of Bloom and Keilin's first assignments together was analyzing the troubled financial condition of Eastern Airlines. Although not much could be done to save Eastern, which was eventually liquidated, Lazard's role led Keilin and Bloom to a landmark assignment representing the pilots' union in its numerous attempts to forge an employee buyout of United Airlines. At the time of the pilots' audacious $6 billion proposal, in 1989, United was the target of a hostile takeover attempt by raider Saul P. Steinberg.

But with a higher bid, the United employees got the nod from the United board of directors to try to put a deal together to buy the company. Their deal required third-party financing, of course, and in the summer of 1989, Citibank -- the lead underwriter of the bank financing -- told the Lazard deal team its loan syndication effort had failed. The deal fell apart and plunged the capital markets into a credit freeze that persisted for the next four years.

Soon after the United deal fell apart, Keilin and Bloom left Lazard and set up their own boutique. They kept pursuing their passion for representing the underdogs, and eventually advised the United pilots again -- for a fee said to be $22 million -- in the successful 1994 United Airlines buyout. Both Keilin and Bloom were greatly influenced by Lazard's Felix Rohatyn and his approach to successfully negotiating deals with often-intransigent parties. Not only had Rohatyn helped to solve New York City's financial crisis, he and Lazard had also been hired by Chrysler -- in 1978 -- to help the company with its financial problems.

After a disagreement with Chrysler management in May 1979 -- reportedly because Rohatyn proposed becoming the Chrysler CEO -- Lazard resigned that assignment and then went to work for the Treasury Department to help it analyze Chrysler's proposed $1.5 billion rescue plan to keep it out of bankruptcy. By early 1980, Congress had agreed to provide the guaranteed loans to Chrysler, prompting Rohatyn to ask -- in a New York Times editorial -- whether it was "in the public interest to avoid large bankruptcies or should the marketplace take its toll, come what may?" (He concluded that a "massive bankruptcy" was best to be avoided and not "in the public interest.")

Rohatyn's style -- since adopted by Bloom, Keilin said, and therefore likely to be key to Bloom's approach in the current crisis -- was to first get the true facts of the situation at hand on the table and then to sit down with all parties and get them, according to Keilin, "to accept the proposition that everyone is going to make a contribution to the solution," including management, the unions, the retirees, the shareholders and the bondholders. "Then you've got to find a way to give everyone a stake in the outcome," Keilin said, "distributed in rough proportion to their contribution."

Keilin believes his former partner will be very clear with each party about what is expected of them to achieve a favorable outcome. "Ron's flexible," he said. "Ron is strategic but also tactical."

Rattner is a different political animal. His very public feud with Rohatyn in the mid-1990s led Rohatyn -- who also hoped one day to be Secretary of the Treasury -- to leave Lazard to become the U.S. Ambassador to France in the second Clinton Administration. Although Rattner would eventually also clash with Lazard patriarch Michel David-Weill and then leave to form Quadrangle in 2000, he has a legendary ability to manage upward. Look for Rattner to talk policy in Washington with the likes of Obama, Treasury Secretary Tim Geithner and White House economic advisor Larry Summers while Bloom rolls up his sleeves and gets his hands dirty in Detroit. To top of page


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