The government should not bailout the American auto-industry and should choose instead to let it fall into bankruptcy where it can restructure itself to more adequately compete in the global auto market, former Gov. Mitt Romney wrote in a New York Times op-ed Wednesday.
Romney, a Belmont Republican whose father was the president of American Motors, said by letting the industry slide into bankruptcy, auto companies can address two crucial problems.
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.
Romney also calls for ending the disparities between auto executives and auto employees and repairing relationships with unions.
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."
Romney mentioned that his father reduced his salary and the salaries of his executive team when the George Romney was the chairman of American Motors. His father also spoke directly to workers, Romney noted.
"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 wrote.
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