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Sunday, November 30, 2008
posted by My Klob | 9:00 PM | permalink

Former Governor Mitt Romney wrote an op-ed in the New York times on November 21st (click here).

Romney begins the op-ed with this:

IF General MotorsFord 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 (read more).

Steve Harris (a VP of Global Communications at GM) responded to Mitt Romney. He said:

I noticed the Boston dateline on Mitt Romney's article advocating bankruptcy for Detroit's auto industry (this is a vast oversimplification). From his New England home (and I thought anti-new England xenophobia was only alive and well in the republican primaries), Mr. Romney may not realize how much the industry has changed since 1969, when his father, George W. Romney, left Michigan (how dare he!) to become housing and urban development secretary.

Translation: Only people who decide to live in Michigan until they die can have an opinion about what the United States FEDERAL GOVERNMENT does with tax payers money, when it comes to giving our money to Ford, or GM. Mr. Harris said "I noticed the Boston dateline on Mitt Romney's article…", and he complained how "George W. Romney, left Michigan to become housing and urban development secretary". I guess George Romney shouldn't have "left Michigan" to become housing and urban development secretary… Perhpas George Romney should have moved Washington DC to Michigan? Mr. Harris in unable to admit that George Romney helped turn around things while he was at AMC… he just spat at him for leaving Detroit.

Besides, the argument is stupid. Mr. Harris said;

Mr. Romney may not realize how much the industry has changed since 1969 (yes, you guys have done a great job since 1969). Nearly every recommendation Mitt Romney makes for United States automakers has already been undertaken by current management in Detroit (and they have done a great job! Just look at their stock! So when Mr. Harris says that "nearly" every recommendation Romney makes… has been taken… this is political speach, that makes an emotional, not a logical argument. Mr. Harris says that they are already "nearly" doing what Romney tells them to. And so in order to argue with him, you have to get into specifics. Most of us are too lazy for specifics, and so we just trust him.) Automakers have been investing in the future on the order of $12 billion a year in research and development — second only to the semiconductor industry.

Mitt Romney did not say, "All you have to do is invest more in R&D". Mr. Harris did not even read Mitt's Op-ed. Does Mr. Harris judge progress by how much money is spent? We are doing a great job… look at all this money we are spending! Mr. Harris would do well in government… don't look at our results, look at how much money we are spending! Besides why not compair how much GM spends on R&D to Toyota?

Then he says:

In addition, General Motors has cut $9 billion in structural costs since 2005 and last year reached a landmark agreement to transfer the delivery of health care to the United Auto Workers union.

Once again, you just have to ask idiots like this: "so, do you think you have followed Mitt Romney's advice and cut enough money?" Lets do some math. They have cut "$9 billion in structural cost since 2005″. That is 3 billion a year (I hope that is GM and not all 3). Maybe it takes someone who got more than just a degree in communication, like Mr. Harris, to realize that that is not enough money when Ford lost 12.7 billion in 2006

It may seem like I am jumping around here, but I am reprinting Steve Harris' op-ed verbatim, and he jumps around making no coherent argument. Mr. Harris goes from saying what a great job they are doing at cutting cost at GM, to making this strange argument:

Finally, it is inappropriate of Mr. Romney to invoke Walter Reuther's name while advocating using bankruptcy to break union contracts. That reference may be overlooked in Boston but surely not in Detroit.

If you don't know what Mr. Harris is talking about, this is what Romney wrote:

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."

Mr. Harris did not respond to what Reuther said; that "getting more and more pay for less and less work is a dead-end street." Mr. Harris did not respond to any of Romney's arguments. Mr. Harris just said that it was wrong for someone who lived in Boston to have an opinion what the Federal Government did with the tax payer's money, and that it was somehow wrong for Romney to quote something that someone told his dad. Mr. Harris failed to explain WHY it was wrong for Romney to quote something that someone told his dad, and I can't figure it out. I read his wikipedia article, and it doesn't seem like he is someone that is so evil, that we must assume every sentence he ever spoke was inherently wrong, and offensive to the tender sensibilities of people like Mr. Harris.

I did not cut, or leave out any of Mr. Harris's so called response to Romney. I'm not trying to make him look stupid by leaving out some of his arguments. But it is not just his stupidity that makes me mad. Mitt Romney did not take a salary as the CEO of the 2002 winter Olympics. Mitt Romney did not take a salary as Governor of Massachusetts. Mitt Romney gave millions to the 2002 winter Olympics. Mr. Harris acts like he is angry at former Governor Mitt Romney said about GM. I don't know how much Mr. Harris makes, but he will make more money if GM gets money from the federal government. Here is an idiot, and an ass, who has a conflict of interest, makes a xenophobic incoherent argument against anyone who doesn't live in Michigan, and who dares have an opinion about not sending the current luxury private plane-flying executives (like him) federal money.

Mitt Romney didn't base his insight just on the fact that his dad was a former automobile executive.

Mitt Romney was a business consultant that got paid to tell failing companies what to do, when they were in trouble. Mitt Romney used to get paid to give advice like the advice that he gave our country. Mitt Romney gave us insight for free, that he used to charge hundreds of thousands of dollars for. 

Here is the rest of Romney's article:

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 BMWHonda, 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.

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