Mitt Romney: Let Detroit Go Bankrupt
November 19, 2008

By Michelle Krebs

Detroit-born Mitt Romney, a candidate for this year's Republican presidential nomination and whose father was Michigan governor and an auto company executive, advocates letting Detroit automakers go bankrupt.

In an OpEd piece carried in Wednesday's edition of The New York Times, Romney, who is expected to make another presidential run in 2012, wrote: "Detroit needs a turnaround not a check." He suggested the turnaround path is through a managed bankruptcy.

What a difference a failed presidential run makes! Romney won the Michigan Republican primary against the eventual presidential candidate John McCain by being a booster for Detroit's auto industry.

"What a thrill it is to come back to Michigan, where almost all the cars you see are American-made, the way it ought to be," Romney told a cheering crowd while on the campaign stump. In his New York Times piece, he calls the Toyota Avalon a better vehicle than the Ford Taurus.

On the campaign trail, Romney criticized McCain for saying auto jobs in Detroit were gone forever. "Baloney," Romney told admiring crowds. He called McCain's approach "pessimism" instead of futurism.

At a meeting of the Detroit Economic Club, which includes Big Three executives as its members and many who likely contributed to his campaign, Romney told his audience: "I hear people say, 'It's gone, those jobs are gone, transportation's gone, it's not coming back'... I'm going to fight for every single job," he told attendees. "I'm going to rebuild the industry. I'm going to take burdens off the back of the auto industry."

But with the presidential campaign over, Romney has changed his tune. In The New York Times editorial he writes that with a bailout, America can kiss its automotive industry goodbye. "It won't go overnight, but its demise will be virtually guaranteed."

Romney argues that without a bailout, Detroit would be forced to drastically restructure whereas with it, the automakerswill stay the course - "the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses

Romney writes in the New York paper today: "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."

His insists current auto company management should be fired and replaced with leaders from unrelated industries. Have them "accept sanity in salaries and perks... 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," he writes.

He also suggests Detroit automakers eliminate the cost disadvantage with foreign makers through new labor agreements, invest in research and development for their future, especially in fuel-saving designs and protect the sales force, not crushing dealers with financial and performance demands.

On the campaign trail, Romney criticized federal fuel efficiency standards -- passed last year over the objection of Michigan's congressional delegation -- which require cars and light trucks to average 35 miles per gallon by 2020. He's slammed McCain for supporting a tax on energy companies that exceed certain levels of carbon dioxide emissions.

He insisted in his Economic Club that "Washington has to stop loading Detroit down with unfunded mandates. Of course fleet mileage needs to rise, but discontinuous CAFE [Corporate Average Fuel Economy] leaps, uncoordinated with the domestic manufacturers, and absent consideration of competitiveness, kills jobs and imperils an industry."

In his editorial, Romney said automakers should come to Washington with a win-win proposition. The government's role, as he now sees it, is investing as much as $20 billion a year in research on "new energy sources, fuel-economy technology, materials science and the like." He also advocates the federal government fixing "imbedded tax penalties that favor foreign carmakers."

Ironically, Romney grew up in the glory days of the American automobile industry in the same Bloomfield Hills neighborhood where today's crop of auto company executives generally reside. His father, George, was tapped in 1954 to run the then beleagured American Motors Corp. when its president suddenly died. AMC eventually was sold to French automaker Renault, which in turn was purchased in 1987 by Chrysler, which eventually ditched most of the company except the Jeep brand.

 

Posted by Michelle Krebs at 9:42 AM under Chrysler , Commentary , Personalities | Comments (2) | digg this | Seed Newsvine

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