Mitt Romney: Let Detroit Go Bankrupt

The former governor of Massachusetts and erstwhile Presidential candidate says that Detroit needs a turnaround, not a check.

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.

Tough words coming from the son of a former auto industry executive and legendary Michigan politician. Romney notes that in order for American auto makers to be competitive they’ve got to eject labor contracts that are making their cars less competitive with foreign-made cars. And he says that management, which has guided American automakers to insolvency, should go as well.

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.

Romney is exactly right on both points.

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