Former Massachusetts Gov. Mitt Romney — whose father once ran American Motors — says he opposes a bailout of the American auto industry and believes bankruptcy may be the only path to solvency for the Big Three automakers.
In an opinion piece published in Thursday’s New York Times, Romney states that if General Motors, Ford and Chrysler get the bailout the companies have sought from the federal government, “you can kiss the American automotive industry goodbye … 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.”
Romney, who has had success revamping corporate finances and is credited with turning around the 2002 Winter Olympics in Salt Lake City, said automakers must take several steps to survive, including:They must eliminate the huge disparity in costs relative to foreign brands by devising new labor agreements that align pay and benefits with those of workers at Honda, Nissan, Toyota and other competitors. If this disparity is not dealt with, any bailout “will only delay the inevitable.”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.” Automakers should cut executive perks drastically. “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,” Romney writes. 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.”
Romney also said the federal government, instead of handing over billions to the automakers, should invest more in basic research on new energy sources, fuel-economy technology and the like, which will ultimately benefit the automotive industry.
He concludes: “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.”
Romney’s father George Wilcken Romney was chairman of American Motors from 1954 to 1962, served as the governor of Michigan from 1963 to 1969 and ran for president in 1968, ultimately losing the Republican nomination to Richard Nixon.
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