Let Detroit Go BankruptNovember 20th, 2008 | 15 Comments | Posted in Business, Business and Economic Expansion, Governor Romney, Jobs, Mitt Romney
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I Googled Gov. Romney’s NYT article on his advise to let Detroit’s auto industry go bankrupt and I found that there were 39,500 entries for “Romney Detroit Bankruptcy.” Since a conservative Republican like Mitt Romney could never in his wildest dreams count on the political support of the UAW, I guess he is completely free to speak his mind.
Although no American of goodwill takes any satisfaction in the plight of the auto industry and it’s workers, the sooner the bloated cost structure is jettisoned, the sooner a leaner, meaner American auto industry can re-emerge. I sincerely hope the industry is allowed to restructure itself and can come back with great cars and trucks that can compete with anything on the market and that the “Made in America” stamp on our products can once again become the envy of the world.
~~John Cronin~~
http://www.nytimes.com/2008/11/19/opinion/19romney.html
By: Mitt Romney
If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences,
I have several prescriptions for Detroit’s automakers.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”
