(WXYZ) In an editorial appearing in today's New York Times, Michigan native and former Republican presidential candidate Mitt Romney writes Congress should not give the Big 3 a bailout.
IN THE VIDEO PLAYER ON THE RIGHT, CHERYL CHODUN REPORTS ON ROMNEY FAVORING BANKRUPTCY FOR THE BIG 3CLICK HERE TO READ THE EDITORIALRomney starts his article by saying, "If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye."
The son of former Michigan Governor George Romney goes on to write that "Detroit needs a turnaround, not a check."
Romney also recounts how his father was tapped to run American Motors in 1954, when the company's president died. He says he remembers how his father worked to turn the company around, something, Romney says, people were still talking about years later when he was in business school.
Romney's editorial makes several arguments as to why the bailout should be rejected. First he argues that it would help reduce the differences in cost between American cars and their foreign competitors brands. Romney sites retiree benefits as something that must be reduced, if the Big 3 are going to be competitive.
The businessman also says the company's need new leadership. Romney argues that "new faces should be recruited from unrelated industries," and that they should come form "companies widely respected for excellence in marketing, innovation, creativity and labor relations." He says this new management must work with labor leaders to "see that the enmity between labor and management comes to an end." Romney says this will also mean a new direction for the U.A.W.
Romney also says that this new approach will also mean a change in the management culture at the Big 3. He says this "will mean accepting sanity in salaries and perks." As an example, Romney sites how his father cut his own pay, and the pay of his executive team, after taking over American Motors. Romney says the current crop of executives need to "get rid of the planes, the executive dining rooms." Romney calls them "symbols that breed resentment among the hundred of thousand who will also be sacrificing to keep the companies afloat."
Romney also say the automakers must look to the future, and not "focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options." He says executives should "manage with an eye on cash flow, balance sheets and long-term appreciation <and> invest in truly competitive products and innovative technologies - especially fuel-saving designs - that may not arrive for years." Romney argues that "starving research and development is like eating seed corn."
Then Romney advises the Big 3 to concentrate on their sales forces, saying "when sales are down, you don't want to lose the only people who can get them to grown." He says "don't fire the best dealers, and don't crush them with new financial or performance demands they can't meet."
Romney also makes it clear that he is not against asking for government assistance, but that it needs to ba a win-win proposition. he says the federal government needs to invest in basic research on new energy sources, fuel-economy technology and materials science that will benefit not just the auto industry.
However, Romney says the current bailout would be a free pass to shareholder and bondholders who be on management and lost.
He says that "the American auto industry is vital to out 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 estates cost. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk."
Romney concludes that "in a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a buyout check."
