By John Fredericks / Staff

The White House auto task force, “shocked” by the depth of the financial problems at General Motors and Chrysler, and coining it a “fiasco,” very nearly allowed Chrysler go under before President Barack Obama decided the economy couldn’t afford to lose another 300,000 jobs, sources inside the White House said.

In a first-person account published in Fortune magazine, Obama’s former top auto adviser, Steven Rattner, details his five months overseeing the automakers’ bankruptcies and the decision to extend them a $62 billion federal bailout. Rattner paints a picture of “stunningly poor management” at both companies, saying that that top brass at both companies were “in a state of denial.”

“We were shocked, even beyond our low expectations, by the poor state of both GM and Chrysler,” he said.

Rattner’s media interviews earlier this week reveal for the first time why the administration ultimately decided to rescue Chrysler — and how close it came to collapse.

Chrysler officials and the United Auto Workers declined comment on Rattner’s observations.

GM didn’t directly address Rattner’s assessment. “Looking back doesn’t help us with the important work we have in front of us,” GM commented in a prepared statement to the press.  “We are grateful for the second chance our nation’s support has given us, and we are confident we will succeed.”

Rattner tells a dramatic back room story of Chrysler’s near-death experience. Daimler AG, which bought Auburn Hills-based Chrysler in 1998, had “badly run” it, he wrote, as did its successor, Cerberus Capital Management LP.

Rattner described Chrysler as “larded up with debt” and “hollowed out by years of mismanagement” and “lackluster management.” It “never had a chance” under Cerberus, he said.

“The hardest decision we made was what to do about Chrysler,” Rattner told the media.

OBAMA TORN, FINALLY DECIDES TO SAVE CHRYSLER

In mid-March, he relayed, key members of the auto task force met in the office of National Economic Council Director Larry Summers and split 4-4 on whether to save Chrysler.

Rattner said the auto task force didn’t want to keep Chrysler on life support if it was destined to die anyway. About 10 days later, on March 26, the auto team convened in the Oval Office to decide Chrysler’s fate. “As we went back and forth over Chrysler, the President himself seemed as torn as [Summers] and I had been,” Rattner said.

In the end, Obama agreed to support additional government aid if Chrysler could meld with Italy’s Fiat. “[Obama] was convinced largely by the impact of job losses and the massive costs that would have resulted from a Chrysler liquidation — up to 300,000 jobs, including suppliers, dealers and others,” Rattner wrote in an essay, released to the press. According to Rattner, Obama’s advisers also “recognized the severe economic and political consequences of a Chrysler shutdown across broad swaths of the industrial Midwest.”

Opponents, led by Austan Goolsbee, a member of the Council of Economic Advisers, argued that Chrysler’s collapse would have benefits: reducing excess capacity, strengthening GM and Ford, and shrinking the amount of government money needed to save GM.

“As a University of Chicago laboratory experiment, (Goolsbee) may well have been right. But we were dealing with people’s lives, not mice,” Rattner said.  “None of us were brave enough ... We just said to ourselves, ‘That’s 300,000 jobs in one day, when you have an alternative that’s not stupid.’

Obama reached a decision during a second meeting that day with his economic team, Rattner recounted. “I’ve decided. I’m prepared to support Chrysler if we can get the Fiat alliance done on terms that make sense to us,” the President concluded.