I did not care for Mitt Romney at first. When this past election cycle began about two years ago and Romney threw his hat into the ring, I saw a wealthy, Ken Doll-type who knew what he was supposed to say and was all too happy to draw comparisons to Ronald Reagan in doing so. He came off as though he was parroting conservative talking points and, combined with his shaky record in Massachusetts, he didn’t rub me the right way.
Over the course of the primary contest, however, I saw a guy who could not escape from that wealthy perception no matter how often he ditched the suit and tie for rolled-up sleeves and a pair of jeans. I saw a guy who was frustrated at not getting the favorable press coverage that John McCain was getting. Most importantly, I saw a guy who may have started out saying what he needed to say, but who began to talk about and argue the merits of conservatism as he progressed along the campaign trail and, by the end of the contest, really began arguing those merits effectively and passionately.
By March, I liked Mitt. I was not thrilled with his intense rivalry with Mike Huckabee–a guy I really liked but felt as though may have overstayed his welcome–but I really enjoyed seeing that passion develop over the course of the campaign, perhaps because it mirrored my own growing passion. By the time he suspended his campaign at the CPAC Conference, I was firmly in his corner.
In the last few weeks of the campaign, after the economy seemed to reach its nadir and McCain botched a chance at simultaneously distinguishing himself from President Bush and showing his conservative bona fides by rejecting the $700 billion bailout, I really wondered “what if.” What if it were Romney at the top of the Republican ticket instead of McCain? How would the American public have reacted?
Romney, I believe, would have been less hesistant to call out Barack Obama for his radical associations. Romney, I believe, would have been crystal clear in placing blame for the housing crisis squarely where it belonged–on Barney Frank and the rest of those Democrats more interested in social engineering than common sense–and would have pointed out that the very people who drove Fannie Mae and Freddie Mac into the ground were among Obama’s closest financial advisers. Romney, I believe, would have been better prepared to speak directly to the American public and put the fiscally conservative solution to our economic problems in terms easy for all to understand.
I see a glimpse of the latter in this piece, which he wrote for The New York Times. He’s absolutely right, and here articulated the conservative solution better than I ever could.
Please take a look, read the piece, pass it along to your friends, and enjoy.
Let Detroit Go Bankrupt
By Mitt Romney, The New York Times
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.