Mitt Romney's Op-Ed in The Times:
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.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination.

Nuts.

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I agree that Mitt Romney is nuts and GM needs to be left alone to die.

If left alone GM wont die they will file chapter 11 and restructure. Lending them money wont make them profitable it will just give them more debt.
I read it on this site "give a man a match and he'll be warm for a second, light him on fire and he'll be warm forever"

I actually like most of what he said. Still, some of Detroit did try to find people from other industries. I think GM hire someone from Proctor & Gamble. It didn't work very well. We will see how Ford will do with Mulcally or whatever his name is. I think the Japanese are hurting too. Just not as bad, tax incentives give them basically free labor for a few years, and they probably get more suport from their government. Both in the form of protectionism and incentives.
GM and Fords corporate culture isn't the only ones needing to change. Look at the whole corporate structure. Look at how many make million dollar bonuses, golden parachutes and their companies are bleeding red.
Also, look at some of those companies that failed in the past. Some of it was high labor cast. Still, the owners raided the cookie jar, wiped out the company and took the retirement money for themselves. The unions are just trying to follow their leadership.
Tom

They already got a $25billion "loan" last year. Was administered by the Dept of Energy I think.

Now they want another $25billion. When is it going to end?

The ONLY way the can get back on their feet is to claim chapter 11. That's the only way they can restructure loans, pension funds, salaries, bonus's & bbenefits, etc...

Without it were going to keep feeding them money to send jobs overseas.

Danny

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Big Three CEOs Flew Private Jets to Plead for Public Funds
Auto Industry Close to Bankruptcy But They Get Pricey Perk
By BRIAN ROSS and JOSEPH RHEE
November 19, 2008
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SHARE The CEOs of the big three automakers flew to the nation's capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.

Even as their companies fail, Ford and GM CEOs continue lavish lifestyles.

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The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough.


All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.


"We want to continue the vital role we've played for Americans for the past 100 years, but we can't do it alone," Wagoner told the Senate Banking Committee.

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Who's Minding the Bailout?WATCH: Excess in the Face of Financial RuinAfter the Economic Crisis, the Fleecing?
While Wagoner testified, his G4 private jet was parked at Dulles airport. It is one of eight luxury jets in the GM fleet that continues to ferry executives around the world despite the company's dire financial straits.


"This is a slap in the face of taxpayers," said Tom Schatz, President of Citizens Against Government Waste. "To come to Washington on a corporate jet, and asking for a hand out is outrageous."



Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.


After the hearing, Wagoner declined to answer questions about his travel.


Ford CEO Mulally's corporate jet is a perk included for both he and his wife as part of his employment contract along with a $28 million salary last year. Mulally actually lives in Seattle, not Detroit. The company jet takes him home and back on weekends.


Plants Closed, Company Jets Stay
Mulally made his case Tuesday before the committee saying he's cut expenses, laid-off workers and closed 17 plants.


"We have also reduced our work force by 51,000 employees in the past three years," Mulally said.


Yet Ford continues to operate a fleet of eight private jets for its executives. Just Tuesday, one jet was taking Ford brass to Los Angeles, another on a trip to Nebraska, and of course Mulally needed to fly to Washington to testify. He did not address questions following the hearing.


"Now's not the time to do that sort of thing," said John McElroy of the television program "Autoline Detroit."

linkus

That pretty much sums it up, in a nutshell.

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I tawt I taw a tread just like this.

I did, I did see a twead just wike it!

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Filing for Chapter 11 bankruptcy will force them to restructure and perhaps get rid of the REAL monkey on their backs...the UAW!!!

Talked to my bro last night who is a practicing physician in Flint. He is VERY concerned about what happens because those GM workers get their healthcare pretty much paid for through Genessee. If GM goes belly up, so will jobs, and as such, healthcare benefits will vanish, as will his caseload.

Not really sure why he chooses to remain there...like others in his profession, insurance companies reimburse maybe 65-80% of his charges...and those come in slowly.

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Barney Franks is characterizing a hard-line position against the auto bail-out as anti-union.

Barney Franks is a character.

I keep hearing "3,000,000+ jobs are at stake". I don't think any or most of those jobs are safe even if they do get a bail out.....

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Do I miss being a service advisor ???

Indeed. As it should be. Until the union is destroyed Detroit has zero chance of being saved.

- Peter.

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