Mitt Romney's view on the bailout..

[Supermans]

http://www.nytimes.com/2008/11/19/op...mney.html?_r=2

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.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

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.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. 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.

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. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, 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.

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.

Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination.

[Mr. Wyndham]

Why do all these people keep ignoring the fact that the labor cost deficiet is gone in 2010...I don't get it?!?!

[dieseldave24v]

Originally Posted by Dragoneye

Why do all these people keep ignoring the fact that the labor cost deficiet is gone in 2010...I don't get it?!?!

Because people are ignorant. They only see things that work in there benefit for the sake of the debate

[GTAHVIT]

Originally Posted by Dragoneye

Why do all these people keep ignoring the fact that the labor cost deficiet is gone in 2010...I don't get it?!?!

I'm giving them the benefit of the doubt here.

It may be because they don't think they can last long enough to get to the point of exercising the new contract?

[Mr. Wyndham]

Originally Posted by gtahvit

I'm giving them the benefit of the doubt here.

It may be because they don't think they can last long enough to get to the point of exercising the new contract?

That's the whole point of the loan, though; to get them to that point!!! (not yelling at you...just fustrated:()

[stovt001]

Originally Posted by Dragoneye

Why do all these people keep ignoring the fact that the labor cost deficiet is gone in 2010...I don't get it?!?!

There's a difference between a favorable labor contract and sustainable labor conditions. This contract is temporary, and it is limited. It doesn't address the fact that Detroit plays under an entirely different set of rules than all the foreign brands operating in the US. The union will always ask for benefits above what the market will give. If they don't, then what is the point of the union? Until Detroit is free of the unions, they simply can't be long term competitive and sustainable, in my opinion. I agree with Romney here, and I would have liked to have seen him win the nomination.

[Supermans]

I found this newsbusters story below, is it accurate?

http://www.newsbusters.org/blogs/tom...osts-uaws-conc

AP's Auto Bailout Coverage Nearly Ignores Excessive Labor Costs, Omits UAW's Concessions Refusal
Photo of Tom Blumer.
By Tom Blumer (Bio | Archive)
November 13, 2008 - 10:25 ET

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Wednesday evening's dour Associated Press report by Tom Krisher and Ken Thomas on the proposed bailouts of General Motors, Ford, and Chrysler acted as if their fates will determine the viability of the entire US auto industry, and waited until the 15th paragraph to name the primary reason why the companies are where they are financially. Beyond that, the AP report did not mention that United Auto Workers has flatly ruled out union contract concessions.

Here is how the AP's report began, followed by selected other paragraphs, including the one (of over 30) that mentioned labor costs (bolds after headline are mine):
Story Continues Below Ad ↓

Failure of auto industry could set off catastrophe
Advocates: Collapse of US auto industry could set off catastrophic chain reaction

Advocates for the nation's automakers are warning that the collapse of the Big Three -- or even just General Motors -- could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and depriving governments of more than $150 billion in tax revenue.

Industry supporters are offering such grim predictions as Congress weighs whether to bail out the nation's largest automakers, which are struggling to survive the steepest economic slide in decades.

"We've got to do this because the cost of inaction is so high to communities, to workers, to companies," said Sen. Sherrod Brown, a Democrat from Ohio.

..... Even if just GM collapsed, the failure could bring down the other two companies -- and even the U.S. operations of foreign automakers -- as parts suppliers run out of money and shut down.

..... Opponents of the idea say government money will just delay the inevitable demise of companies that are on death's doorstep because of years of mismanagement and labor costs that are far higher than their global competitors.

"How is this money going to make a positive difference in creating a new competitiveness?" asked Sen. Jeff Sessions, an Alabama Republican.

Sessions and others also fear that opening the treasury to automakers will invite more industries to plead for federal help.

..... Sessions and others say Chapter 11 might be a better option than government loans.

..... Automakers say they are poised to rebound because they have been restructuring for years -- shedding jobs, consolidating engineering and design, and making plants more efficient.

But they can't claim to have done much about labor costs, because they haven't.

Here are three key values in a chart shown Monday at Carpe Diem (HT Small Dead Animals):

Total Compensation Per Hour, 2007-2008 (includes wages and all benefits):
Big Three automakers — $73.08
Toyota — $48.00
All workers — $28.48

In 30-plus paragraphs, the AP reporters "somehow" failed to tell readers about UAW President Ron Gettelfinger's refusal last week to give an inch on labor costs, as reported by Dow Jones at CNNMoney.com:

The prospect of concessions from the union came up during a meeting involving executives of Detroit's Big Three auto makers and Democratic Congressional lawmakers on Capitol Hill Thursday. But UAW President Ron Gettelfinger made clear that concessions were out of the question, union lobbyist Alan Reuther said in an interview with Dow Jones Newswires Friday.

"Workers and retirees have already made significant sacrifices," said Reuther, paraphrasing remarks that Gettelfinger made to House Speaker Nancy Pelosi, D- Calif., and others in the meeting, including renegotiated contracts. "We feel we've already stepped up."

Translation: Taxpayers are just supposed to accept the UAW-imposed cost structure as it exists, even though those being bailed out earn $44.60 an hour more in wages and benefits than other working families.

What an outrage. The AP's failure to mention the UAW's stand is journalistically negligent.

As an e-mailer said in a post at Michelle Malkin's blog earlier this morning:

The Big 3 has a cancer that needs to be removed. It doesn’t take a rocket scientist to understand why they cannot compete profitability (sic). They have parity on supply costs, materials, and energy with Honda and Toyota. So why can’t they compete? It is clearly the cost of labor.

There are several other howlers in the AP report, the most obvious of which is that the whole industry will somehow collapse if the Big 3 fail. I don't want to minimize the difficulties posed by the dislocations within the industry and among its suppliers, but as long as consumers need and want cars, there will be companies who will make them -- and there are plenty of others who make very good ones.

Cross-posted at BizzyBlog.com.

—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters

[BigRigMike]

I think the newsbusters article shows exactly what Dragoneye is talking about it. It is high in 2008 in comparison to everyone else but it is going to be going down in the next two years which nobody seems to be talking about.

[Mr. Wyndham]

Originally Posted by stovt001

There's a difference between a favorable labor contract and sustainable labor conditions. This contract is temporary, and it is limited. It doesn't address the fact that Detroit plays under an entirely different set of rules than all the foreign brands operating in the US. The union will always ask for benefits above what the market will give. If they don't, then what is the point of the union? Until Detroit is free of the unions, they simply can't be long term competitive and sustainable, in my opinion. I agree with Romney here, and I would have liked to have seen him win the nomination.

Of course, that's what unions are for. But GM negotiates with them. That is THEIR place, and they've done it this time around. Unions can only have a stranglehold over a company, and be a 'cancer' if they let them. The contract is temporary in the sense that it will be renegotiated as it always has been. But it's not going to suddenly jump back up, again -- that's insanity, so I don't understand what you mean about temporary. And what's limited about it??

This "freedom of unions" I keep hearing is way overexaggerated. Whether you're in a union or you're on your own, so long as the pay is the same, what does it matter??

[stovt001]

If the pay is the same then why pay dues to belong to one? There has to be some benefit that comes at a cost. Unions come with restrictive work rules. Union workers must be bought out instead of laid off. All those extra benefits must come at a cost to GM, and it doesn't matter if their monetary wages are the same and health benefits cost the same. GM still has all the other union costs to deal with. And suppose GM does survive and actually improves greatly when the next contract comes up. Will the union not demand much more and strike GM to within an inch of its life until it gets it?

[Crowley]

Originally Posted by Dragoneye

Why do all these people keep ignoring the fact that the labor cost deficiet is gone in 2010...I don't get it?!?!

I think becuase that is only a piece of the pie. Much more needs to come into line than the labor cost deficiet ...

Crowley

[Mr. Wyndham]

Originally Posted by stovt001

If the pay is the same then why pay dues to belong to one? There has to be some benefit that comes at a cost. Unions come with restrictive work rules. Union workers must be bought out instead of laid off.

That (^), I don't agree with...and yes, unions have benefits...it's undeniable. Unions provide a sense of worker protection most of all, though. The company can't screw anybody over...whether or not it's likely to happen.

Originally Posted by stovt001

And suppose GM does survive and actually improves greatly when the next contract comes up. Will the union not demand much more and strike GM to within an inch of its life until it gets it?

If they're smart, they won't. They'll realize that GM's doing as great as it is because of the previous concessions they made. And if they strike GM to death, they will have killed themselves. I hope they try -- it ought to be interesting. But that's what I meant about negotiations. There are two sides to every contract. Simply dissolving unions will not do as much good as standing up to them, imo. It would be like a misbehaving guard-dog. You need to train it to reap the full benifit. You can't just put it to sleep.

[GTAHVIT]

Unions have proven time and time again that they can't leave well enough alone. In light of their refusal to compromise with GM on the current contract, given the current situation, reinforces the fact that they will continue to bite the hand that feeds them.

[Mr. Wyndham]

Originally Posted by gtahvit

Unions have proven time and time again that they can't leave well enough alone. In light of their refusal to compromise with GM on the current contract, given the current situation, reinforces the fact that they will continue to bite the hand that feeds them.

Not ALL of them...and I can't stress that enough. My father belongs to a local union, and they've simply renewed their contracts, besides adjusting for inflation and tweaking certain programs, for the past I-don't-know-how-long. The UAW is possibly the loudest union in exisitance...and the things they do reflect poorly on "unions" in general. Not all unions are the same as the UAW....

The UAW is too big. They have too many areas with too many interests, and a gung-ho leader. I get that. But they sucked it up; cut wages in half, and shifted the entire healthcare burden to themselves among other 'concessions' (I call them reality-checks) in this last contract. That's why I'm not willing to harp on them right now. They HAVE been responsible in terms of helping the big three to get through this...