--F. Scott Fitzgerald (1896-1940)
In an op-ed piece running in The New York Times today, former Massachusetts Gov. Mitt Romney (R), who fought John McCain for the GOP presidential nod, makes a cogent case for letting Detroit's Big Three go bankrupt.
That is not the prescription I offered here yesterday by any means. But I have to say that despite having governed a New England state, Gov. Romney knows a whole lot more about how Detroit works than most people. According to the governor, his father, George Romney, who also ran for president (in 1968) and was himself Governor of Michigan (1963-69), is still studied in business schoools for how he saved American Motors Corp. (AMC) back in 1954.
George, the first Gov. Romney to run for president, knew a bit about saving Detroit too
On top of that, Mitt himself has that whole saviour-of-the-Salt-Lake-Olympics thing going for him so I am quite willing to concede he may have the far better idea on what to do about, GM and Chrysler. And that he also admits to being a car nut-- which I daresay most of us in trucking tend to be to one degree or another-- stands him well in my estimation.
Anyway, it is Mitt's view that if the Big Three get bailed out, "you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed." Those are the harshest words I ever heard the gentlemanly Governor utter, but he is addressing a subject worth getting worked up over.
Romney argues that given a bailout, the Big Three "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."
Romney goes on to lay out a multi-part plan he says the Big Three should follow to dig themselevs out of the ditch.
He then states they are not wrong to ask for federal aid, "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."
Romney calls his tough-love prescription a "managed bankruptcy" and suggests his way "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."
He adds that in a managed bankruptcy, "the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check."
Mitt may well be right. Anyway, we do agree that, as he put it, "the American auto industry is vital to our national interest as an employer and as a hub for manufacturing." And, like me, he thinks the top managment of the Bg Three ought to-- how can we say this diplomatically?--make way for new leaders.