Romney on Auto Bailout: Feds Should Guarantee Fan Belts But Not Healthcare

Posted by: David Kiley on November 21, 2008

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Earlier this week, former Massachusetts Governor and Republican Presidential hopeful Mitt Romney chimed in, via a New York Times op-ed column, with his argument for letting Detroit’s automakers go bankrupt as a means to fixing their problems and reorganizing.

Unfortunately, several members of his party, and even some members of the media, have given his argument added weight because Romney’s father, George Romney, had taken over American Motors in the 1950s with some success.

Following this logic, though, would mean that Hank Williams Jr. is as talented as his father.

Romney’s column was not completely lacking sense. I would still say that 94% of it was pure clap-trap, but I wouldn’t want to give clap-trap a bad name. The best way to break it down for you is to take it step-by step, and insert my rebuttals after each point the Governor tried to make. My notes are in italics.

Romney: If General Motors, Ford and Chrysler get the bailout that their chief executives asked for this week, 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.

[Romney joins a legion of pundits and kibitzers who are oblivious to two facts: The companies have been dramatically resizing and restructuring. First: Ford, for example, had cut its hourly workforce from 83,000 to 44,000 in five years, and its white collar workforce from 33,000 to 12,000. The numbers at GM and Chrysler are comparable. Second: Retiree burdens? The companies entered into covenants with workers on pensions and retiree healthcare. The big burden is paying healthcare benefits of retirees and their dependents still too young for Medicare—about 400,000. If the U.S. had a healthcare policy like Germany and Japan, just to name two rival auto-making countries, this wouldn’t be an issue. Just what would you do for those families and their healthcare costs Governor Romney? Chuck them onto the heap of the uninsured? How about a more constructive suggestion like compelling the retirees, through arbitration, to pay more for their healthcare benefits as a way of pitching in to the problem. Given the choice between losing all benefits and paying more for them, most families will opt for the latter.]

I love cars, American cars. I was born in Detroit, the son of an auto chief executive.

[Mitt Romney shamelessly launched his unsuccessful Presidential run in Dearborn, MI in 2007 despite the fact that he hadn’t lived there in decades. Why? Because it was considered a swing state. He said at the time that he would fight for auto industry jobs in Michigan. Why didn’t he launch his campaign in his home-state of Masssachusetts? Because the chance of a Republican winning Mass. in a Presidential race is nil.]

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.

[What took place in 1954 with AMC is hardly applicable today when Detroit is competing against foreign automakers with vastly different cost structures—the cost structures they have in their home countries.]

First, their huge disadvantage in costs relative to foreign brands must be eliminated.

[Come 2010, GM says its cost of sales will be 25%, very near that of Toyota. That’s one example. Yes, they have been spending billions to off-load their healthcare obligations in the meantime. But there is a moral question here, isn’t there Governor? If the U.S. government provides the credit necessary for GM to go bankrupt, are you telling me that our tax-payer dollars are going to be specifically used to chuck hundreds of thousands, if not a few million workers and their families, onto the rolls of the un-insured while the government simultaneously does nothing for those families? I would offer that it has taken Ford, for example, five years to make such huge cuts in its workforce, and ditto GM, because it has tried to resize itself morally, through employee buyouts and the like and not flat-out dismissals.]

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.

[The automakers were well on their way to accomplishing this before the credit meltdown, which most would agree was a function of government over-selling home ownership, and Wall Street’s willingness to securitize any piece of crap mortgage underwriting that came down the street. Let’s see…your experience has been as a Governor (the government) and as a hedge-fund investor. Where was the clarion call from Mitt Romney warning of this toxic cocktail that has driven the U.S. economy into the ditch, taking the auto industry with it? Yes, Detroit had long played a game of maximizing cash-flow over profits in order to pay for a gradual resizing and its enormous retiree and healthcare legacy costs. That left the companies too vulnerable for the current meltdown. But as you are fond of reminding us that we are in a global economy, how can the Big Three or whatever companies would arise from bankruptcy be expected to compete against companies in Europe, Japan and China that do get government bailout support?]

That extra burden is estimated to be more than $2,000 per car.

[This is a number that pre-dates the last UAW contract, and, as I said, Detroit had parity in its sights come 2010 but for the credit meltdown that has made the situation so dire].

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.

[Have you driven a 2009 Taurus that wasn't a stripped down rental? Somehow, I doubt it. I have driven both cars, and for “feel,” I would compare the two cars very favorably. The Avalon is no great shakes.]

And 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.

[So, you are grouping GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Bob Nardelli in one lump the same way that GOP Alabama Senator Richard Shelby does? Mulally came from Boeing two years ago. Nardelli came from his stint at Home Depot less than two years ago. If you want to go after Wagoner, a GM lifer, go ahead. But at two-thirds of your target, the outsiders have arrived! I’m not carrying anyone’s water here, just criticizing your superficial analysis.]

New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

[Ford and GM have done this at the top. In the 1990s, there was an attempt to recruit managers from packaged goods, IT, etc. We who lived through it recall it as mostly a disaster. Also, please tell me the names of the executives from, say, Silicon Valley, who are going to uproot to move to Michigan to work for car companies you want to push into bankruptcy in this economy?]

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.”

[Governor, if you bothered to read the last UAW agreement, you would see that today’s union is a far cry from the days of Walter Reuther. But I would bet what’s left of the value of my house that you didn’t read it. Your perspective on the labor seems to be fixed in the 1950s.]

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.

[Again, Governor, your numbers and perspective are out of date. Rather than a Chapter 11 Bankruptcy, how about some high-minded political leaders make a direct appeal to workers and retirees to perhaps accelerate some of the changes the union has already agreed to in exchange for not driving the companies into bankruptcy. But when you do this, I hope you have a government solution to provide healthcare for retirees not yet eligible for Medicare.]

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.

[Finally, a paragraph that makes sense. But this is hardly a new idea. In fact, most of those perqs other than the planes are gone. But I’m with you on making the CEOs work for a $1 a year for the next two years, or deferring their compensation to a point where they get paid after they hit some government supervised goals. And, hell yes, make them fly commercial like the rest of us.]

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.

[Hedge funds, the world you come from, are known for not focusing on quarterly profits and for building long term strategies?]

[I know there is a perception that Detroit hasn't been investing in new technology. But the only area I can find where Detroit seriously lagged the Japanese as in the area of hybrid car design. No, GM nor Ford produced a Prius. Though, Ford did produce an Escape hybrid years ago that is still selling. But they are fuel-economy competitive or better than the Japanese on virtually every car where they go head to head. Look it up Gov. on www.fueleconomy.gov. The knock on Detroit is that they sold many more SUVs than small cars. However, absent an energy policy that would have kept gas prices high enough to give consumers a natural incentive to drive small cars all those years, Detroit sold the vehicles America wanted in the free market you are so fond of. Were all those Americans who craved Explorers and Trailblazers as family cars taken to Gitmo and tortured to buy them? No…they wanted them because gas was $1.50 a gallon. Toyota and Nissan followed GM, Ford and Chrysler into pickup trucks and SUVs. Sure, Toyota makes a Prius and Corolla. But they also make a Tundra, Sequoia, 4Runner, Tacoma, Highlander and Landcruiser. But you know what? Their’s aren’t as good and they suck up more gas than Detroit’s trucks and SUVs. GM could beat Toyota to the punch with plug-in electrics. And it has as many patents on electric car technology as Toyota. Ford’s Fusion Hybrid beats the Toyota Camry hybrid by five or six miles per gallon. I’m not saying there haven’t been mistakes made by Detroit, but I’m holding you accountable to make sure you at least cite mistakes truthfully. I’m weary of the perception that Toyota sells a million Priuses a year and that it’s SUVs and pickups get 50 miles per gallon. For the record, I wish Detroit hadn't invested so deeply in SUVs, too. But Washington's lack of policy on energy and oil prices set the stage for that strategy. Japanese automakers were better prepared because their home market, Japan, is a market that encourages small car development because of high gas prices and shortage of real estate.]

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.

[The only problem with Detroit’s dealers is that there are too many of them. The companies have been working with the dealers to encourage mergers. That process has been taking place. Filing Chapter 11, as you suggest, would actually do the most harm to dealers because it would probably allow the automakers to pare their dealer body more quickly with far worse repercussions for these independent businesses.]

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.

[Fine, but who oversees this? The Clinton Administration spent a billion or more on a program that made no sense. If the government wants to invest in technology, let them put money directly at what we know works—lithium batteries. Government investment can make it easier to scale up the technology faster, and provide tax credits to encourage the first waves of customers to buy them. That goes for cellulosic ethanol as well. We know corn ethanol is a boondoggle.]

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.

[Your second worthwhile point. Stay with what you know Gov. Shareholders have to take the pipe—what’s left of it. And bond-holders will have to write down their losses. This has to be part of the bailout proposition.

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.

[You have clearly been talking to too many Chap. 11 lawyers who would be the only winners in this scenario. I recall at a debate last year, when asked whether you would attack a known nuclear facility in Iran, you said you would assemble your lawyers to decide. Why do you listen to so many lawyers?]

It would permit the companies to shed excess labor, pension and real estate costs.

[Real estate costs? Since when is that part of the company’s problem? Excess labor and pension costs? You realize that the government will wind up eating a lot of this, right? The cost to the government of rolling bankruptcies in the auto sector would be well over $100 billion at minimum. For far less money, why not keep people working and help the automakers with loans get to the restructured place they were on their way to before the credit crunch?]

The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

[So, you want the tax-payer to guarantee a fan-belt, but not healthcare for families who, for example, may have a dependent with with cancer or diabetes? No wonder you lost to McCain.]

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

[I can’t believe The New York Times printed this.

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

[How'd that work out for ya?]

Reader Comments

Lisa Small

November 21, 2008 2:54 PM

Thank you, Mr. Kiley, I'm quoting you here:
http://lisasmall.livejournal.com/48452.html

Romney's plutocratic instinct to "shed" the contractual obligations autoworkers bargained for is, in its own way, a variation of the Wall Street bailout as a whole: privatize profits, socialize losses.

His casual cruelty about the welfare of these honest aged folk who would be robbed of the security they earned for their old age should be noted carefully by anyone looking ahead to 2012.

Tom Wilkinson at GM

November 21, 2008 3:55 PM

It is frustrating when a pro-business politician seems to have so many mispercpetions about an important industry. Thanks, David.

Taylor Prince

November 21, 2008 5:13 PM

It's always easier to find fault in someone else's plan, than to face the critics by coming up with one of your own. Instead looking for problems why don't you spend a little while finding solutions.

Dan Bedore

November 21, 2008 7:44 PM

Excellent analysis, David. Romney is like many auto industry outsiders who don't know much about the business, but are quick to tell us how to fix it.

Odd that people conclude that senior managers, trained in the best business schools in the world, and experienced in diverse global industries, somehow become instantly stupid when they get north of Toledo.

Jordan Stephenson

November 21, 2008 10:21 PM

David,

I will have to respectfully disagree with you on many of your arguments.

Governor Romney made references to the 50's saying that those methods are out of date. In your rebuttal you say that he is out of date, too in the 50's? However, Romney was not supporting those methods, but supporting a turn around from such left over methods.

Next- you criticize Romney for saying that they need a change of management by defending the CEO's position. However, changing management involves a lot more than just one CEO.

Also- you accuse Romney of not wanting tax payers’ money going towards health care? That is not ever mentioned by Romney, but he said the burden of benefits should be lifted. You see, in Massachusetts leadership of Romney DID provide healthcare for the people of his state- which lessons the burdens on the companies that would have provided those, right? He did that without raising the taxes.

The truth is, Mitt Romney has proven that he has tremendous capacity to bring organizations out of tough situations. Look at the 2002 Olympics, and an entire career dedicated to helping struggling businesses. His style of teaching the issues while advocating solutions is a great indicator of his depth on the subject.

I can see that you were very determined to cut the man down on every angle you could, but please bring the kind of respect to the issue it deserves.

Kathy

November 21, 2008 11:11 PM

Your approach to deconstructing Gov. Romney's op-ed is not very original. Aside from that, I find it ironic that you're criticizing Romney on health insurance. He's the only governor in the U.S. who found a way to get health insurance to all his citizens through a private, market-based reform. Maybe Jennifer Granholm can do the same in Michigan, if she takes time off from raising taxes.

Romney is a turnaround specialist. He knows what he's talking about. The only way to save the car industry is with a major restructuring done under the protection of the Chapter 11 bankruptcy process. Yes, labor will have to sacrifice, as will management, but it's the only way to make our domestic auto manufacturers competitive for the long term.

From Kiley: I think if you look at the Mass. plan, you'll find it has some big flaws. And Romney isn't a turnaround specialst of any kind. He was an investor. Yes, he fixed the Olympic committee. But he's not much of a hands on manager.

Ci2Eye

November 22, 2008 2:04 AM

Mr. Kiley,

Surely you aren't suggesting that Detroit has spent as much money on powertrains in general as the imports.

When you state you can find only one area and that is hybrid technology where Detroit is behind you neglect all other engine and transmission components. The sad fact is that GM continues to use engines and transmissions that are outdated technologically and has done so for years. This, to me, is their Achilles heel. While the General has solved the assembly quality and in some cases the material quality issues and have begun to catch up on safety and design is seeing a renaissance, engines and transmissions are still overall not up to par.

I've never understood why tiny BMW can produce a line-up of world class engines from 4-cylinders to the world's best inline sixes, outstanding V-8s, a V-10, and a V-12 plus amazing diesels and giant GM still gives us such archaic engines as the 3800 V-6. And despite eight brands ranging from cheap to Cadillac, GM has no V-10, no V-12, no modern diesel for their cars. Sure they have the 3.6 V-6 now which is good but they use it in Chevys, Cadillacs and everything in between. Shouldn't a Cadillac have something better under the hood than a Chevy Malibu? Again, if BMW can build dozens of state-of-the-art engines why does giant GM only have one or two and a bunch of relics? The company still sells four-speed automatics in Cadillacs while Lexus now uses an eight-speed and Mercedes is up to seven. GM is the biggest automaker in the World. Why is this?

The fact is GM is behind in a lot more than hybrid technology. They've been behind in safety, design, quality, etc and are only now beginning to catch up in some of those areas.
I don't agree with everything Romney says but I do agree that GM is living in the past and needs a radical transformation. Somehow they have to have the freedom to achieve that and re-invent themselves. Romney's point is that giving GM 12 billon to keep doing business as usual is no recipe for long-term success. They must be given a bold new path to make their brand 'The Mark of Excellence' again or we are just wasting money.

Citizen American

November 22, 2008 7:16 AM

Either restructure or the companies go under, regardless of what advances have been made to date - pretty simple to understand. As for the Unions - either put the health of the overall business first or there will be no jobs to argue about - even more simple to understand.

So, Mr. Kiley, what part of expense vs. revenue do you not understand?

Obama Boy

November 22, 2008 11:41 AM

Interesting rebuttals, but Romney would have a ready answer with further facts and economic common sense he can't include in a short NYT op-ed piece.

Socializing losses? Try putting bad debt on private banks who understood their risks and made interest profits all along the way; re-deploying skilled labor in other industries; shedding PREPOSTEROUS UAW benefits and jobs that make operating successfully long-term impossible. That's making the world a stable place; more viable; based on market reality.

The US Auto Industry had a near-death experience in 1973 and was resuscitated in a vegetative, brain-dead state. It's no crime to suggest putting it out of its misery and redeploying people to a productive future. To do otherwise is cruel and misleads the next generation of workers into believing in a false perpetuity. The UAW had its day and it is time for truth-telling. THEY put the Big Three out of business. They bit the hand that fed them and now it's falling dead.

It's not Romney's doing, and it is not his fault he understands Ch. 11 and how it serves the people better than the other alternatives (which obviously you don't.) Sure, there is fine-tuning, but not caving to the "Demands of the Day", which is all the forward-thinking that has been done. The Big Three executives completely embarrassed themselves with bumbling testimony this week.

Our "Team of Rivals" POTUS-elect should put this guy 'in his place' and ask him to be Car Czar. (By the way, the "Change We Need" sure looks a lot like it means the same "Good ol' boys of Clinton"; so much for CHANGE we all voted for. More of the same Clinton-nonsense?)

To give Romney the job would give him the chance to shine or slump out of political existence. Either way, it is a win.

But Obama won't do it because if Romney were to succeed and put his big mouth where it belongs, he would very possibly land 3 million new voters who saw what he could do and understood a little of how the real economy works, not the unsustainable, socialized one, the UAW one, the welfare one, but the one that creates skilled jobs that last, both in and out of the auto biz.

You don't leave a cancer to fester for 40 years without having to cut off an arm to save the corpus! Duh.

And Romney ran a private equity firm, not a hedge fund, which means he rolled up his sleeves and worked like a dog to save tens of thousands of jobs and entire companies by restructuring and cutting fat and jobs that were the cancer of their businesses. Read about it. He is one of the two dozen American heroes that ran for President & it is unbecoming to put him down.

Would you criticize the doctor who saves your mother for cutting out the cancer? She may be hurting, but she is alive. Somebody has to do the dirty work & shouldn't be criticized with pot shots from the unaccomplished and uneducated who just want their bite without concern for the next generation. Well, the UAW is delivering the disaster to the next generation right now.

norman ravitch

November 22, 2008 12:17 PM

The notion that certainly companies are TOO BIG to fail means that capitalism needs the government to survive, which means it is not capitalism at all but corporatism, the relatively benign version of Fascism. Or call it state capitalism. Whatever the label it is obvious that historic capitalism is gone. Let us call a spade a spade.

Tony

November 22, 2008 12:26 PM

David,

You are so right with this article and your rebuttal to Tom Friedman last week. I am shocked to see how the Congress can give 700 Billion dollars to financial institutions and AIG in just ten days without ever speaking to one of their CEO’s, and then drag the 3 auto CEO’s through hearing after hearing for 25 Billion dollars. Could it be that many of these Republicans congressman are angry at the very working class that just voted them out of office? Or it could be that as former Chairman of Goldman Sacks, Henry Paulsen favors saving financial companies like his former employer?

Except for you, the press has been so unfair and one sided on this issue, almost brazen with criticism of GM, Ford and Chrysler. It is not surprising that only 20% of Americans support making this loan to the auto industry.

The irony of course is that in other strong automotive countries like Japan, France and Germany, the press understand the importance of their industry and suport it. It is only in America that we love to kick the home team. This goes for product reviews where the press is overly bias for anything with the name Toyota or Honda on the hood. Granted those guys make good products, but GM and Ford are right there with them.

Maybe shinning the spotlight on our auto industry will open people’s eyes the progress they have made and it’s importance to our way of life.

Keep up the good work.

John Toomey

November 22, 2008 12:58 PM

Mitt has some errors, but 3 key points. The auto manufacturers lobbied for the CAFE rules they wanted to prevent investments in fuel efficiency. Every business should do scenario analysis of the supply chain and the cost of a gallon of gas and the simulation of potential levels and impact should have led industry to a risk reduction effort on furthering fuel efficiency. Two, manufacturers have also not designed all the cars Americans wanted, foreign manufacturers only make station wagons (which many prefer, we bought a Volvo which at least has a Ford engine - with poor fuel efficiency by the way). They also haven't tried to change the cost structure of the industry to allow the profitable production of small numbers of cars. Having to produce in annual lots of 200,000 + cars takes away the personality of any vehicle. Third, people are willing to help if there are structural changes in the health care industry that treats ex-industry employees fairly, but not tremendously better than what rest of society should get. I am a former GM fellow who worked for GM Canada for 7 years. The industry was out of touch then (no executives drove, they all had drivers, employees were prevented from renting foreign cars, the engineers who needed to see what was happening. I have since been in consulting and financial services in senior positions. If the auto manufacturers enter bankruptcy, they would need people like me to help them restructure and I am willing.

Rich

November 22, 2008 1:28 PM

I enjoyed reading your opinion! You make some good points, however by no way are your ideas infallible either.

I specifically point to your ideas about the UAW. You paint them as a group that does not want GM to fail. I agree with that but you neglect to say they don't want them to fail but they want irrational job security and undeserved wages.

I want universal access to affordable health care (I would love to take notes from Germany, Britain, and France). I want a generous progressive tax to allow the middle class and the poor to breath. BUT what I don't want is unions having a overt power over how a company should run. And as the UAW showed last year in the stirke they don't care if the company is failing they will leave their jobs and demand more when there is less and less available.

Darwin fenner

November 22, 2008 5:57 PM

Very good article. American Automoble manufacturers are saddled with a lot of legacy costs that foreign manufacturers aren't saddled with. I believe that a few of our politicians should be asked if they would be willing to help the automakers by sacraficing some of their overpaid salaries, pensions, healthcare and other perks paid for by the American taxpayer. I wonder if our president should start using public transportation. I wonder if the taxpayers cost of keeping the Blue Angles flying around the country side is a good use of our taxpayers money. I wonder where our elected officials have been the last few years while they are largely responsible for this financial mess. And, I think that Congressmen who gave up his dealerships for his posh Congressmens job shouldn't be sent back to come up with a plan to save the dealerships.

Lori

November 23, 2008 12:32 AM

David Kiley gives more credit to the Big 3 than is deserved. Just because a sinking ship has bailed out half the water doesn't mean they have the capacity to stay afloat. Romney is right, drastic restructuring is in order. No more throwing cash at a sinking ship to have it sink a bit slower. When it finally sinks, the all that money will have served no purpose.

GMBOY

November 23, 2008 8:43 AM

Mr Kiley,

While I believe you are some what accurate with your MPG figures Detroit VS the Asians you have missed the biggest point. GM FORD and Chrysler have made some of the biggest pieces of crap on the planet. While most Toyota's will run for 90-100 K before needing major service. Most of GM's owners will need to invest at least 2500K by the time any of the GM Vehicles reach 30,000 Miles, Car through SUV. After the 30K its all down hill from there. If Detroit's Strategy was one of designing cars that lasted 120K Before needing repairs GM would not be in the situation that it is in. Same is true for Ford and Chystler. Having owned mostly GM and repairing them as well I am speaking the truth. They do not work as a Team at GM. If an engineer designs crap why does he have a job why does he have benefits? Same hold true for executives, Same holds true for workers.

Do you get my drift here? Theye are all responsible. The only way to cure this is let them go bankrupt. Until the US can figure out how to build cars repair the old ones until a new company emerges with a product line worthy of competing. Public companies only care about making money for share holders and not the quality of the product. You think the auto industry is tanking wait till the share holders of HIGH TECH companies realize most of those companies have no products as well.

From Kiley: while im sure anecdotally you can tell me about gm product that wasn;t good, and toyota product that was.....you can't analyze this stuff anecdotally. The numbers show that GM, and especially ford, have dramatically narrowed the quality gap.

Paul (Vw)

November 23, 2008 9:12 AM

Tough times require limited available resource to be allocated based on greatest need/return. At least in a capitalistic society.

I'm sure an awful lot of people have been and will be hurt by the decades-long decline (engineered by executives and unions) of the Big (oh, that's right no longer "Big" but now "Detroit") three into obliteration. But Romney is being clear and level headed. Why use tax dollars to continue building cars no one wants? (For example: I've been told by a reliable source that the Malibu makes a terrible taxi cab compared to the Prius when judged on unfair standards )

>>> [I can’t believe The New York Times printed this.]

Mr Kiley--I'm surprised at you! You can't "believe it"? Seems just a few days ago you were posting a blog where you were first stunned by Tom Friedman. In any event, it's the opinion page where both Friedman and Romney's pieces ran. Perhaps you felt so stunned that you relied on personal attacks rather than cogent arguments...

>>> Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination. [How'd that work out for ya?]

I'd say better for him post-general election than the rest of us. Would the stock market not have dived like the Ford Edsel...if the man who won the 2008 Michigan Republican presidential primary (by almost 10%) had become our president elect instead?

Jason Shore

November 23, 2008 10:16 AM

Where do I start to refute your comments to Mitt?

Let us start with the fact that GM, Ford and Chrysler have build junk for years. I am not bashing US auto makers I have owned more than 15 GM products over a 30 year span and I must say I am speaking form fact. Either these vehicles rotted out after 3 years 30 years ago or the later just had mechanical problems. In the 90's they seemed to master the rotting problems but they where inundated with mechanical problems. Wheel hubs that lasted 30K Miles, Intake manifold gaskets that leaked with 50K miles, Interior design from the The old days. Dexcool antifreeze that would rot out gaskets of the engine not to mention building crud in your radiator and internal cooling chambers. Gas tank Pumps-sending units crapping out with a $ 600.00 repair cost.

So let me get your rebuttal to Mitt. Kevin you think they (the big THREE)should get bailed out. Well sir I beg to differ. Management's attitude has been build it and they will buy it, share holders need dividends. Workers "pay me and give me the benefits" No work ethic or pride in their work. Engineers design POOR vehicles and they all get a pension. Let them, the big (3) go bankrupt If my employees new there was a problem with the products that we produce and they did not bring it to my attention they would be fired and vice verse.

You are basically recommending putting a finger in the leaking dike. The dike is going to collapse there are to many holes. Let it flood and flood it will but you know after a flood everything becomes very fertile after.

This all comes down to We DO NOT HAVE ANY PRIDE ANYMORE OR WORK ETHIC. Its all about the dollar. Greed.

Sure bankruptcy will effect all the Union workers with nice pensions but hey that's life. What about all the self employed people of the US that don't get help. People with pensions, government workers (KEY WORK CIVAL SERVANTS) Need to wake up about how the real world works.

And I am so tired of people writing articles about autos that don't even own a car or if they do have no idea how they operate and just care about if it has GPS for them because they have no idea how to read a map and a DVD player to entertain there lazy undisciplined children.

For my closing vent. GM would gives there execs and plant managers BRAND NEW VEHICLES every 3 - 6 months and takes feed back from the operators. How ridiculous they should have been driving vehicles that where 5 - 3 years after production and take the quirks out of those and refine them to move forward. That is how real business works. In other words they never ever once corrected a defect that they created. Hence the problem they are all in today. And yes most of the Toyota's and the likes get about the same mileage as the big Three but the key difference is the Toyota's and the likes LAST LONGER and are more Dependable. Cost to ownership must LOWER.

Jason

Scott Monty

November 23, 2008 2:50 PM

David, thank you for taking the time to dissect and respond to Romney's points. It helps make some of this complex industry a little more understandable to many people.

Scott Monty
Global Digital Communications
Ford Motor Company

Tony Creta

November 23, 2008 5:19 PM

I would like to write it all down but it would take about 100 pages
Without reading the whole boring BS article word by word please just give the auto companies what they need to make better cars. We need jobs.
I know most of all those people that run this great country in office or head of a company think the American Public is naïve and doesn’t think were smart enough to know about all the dealings going on behind closed doors so you can make the big bucks.
The buck is going to stop for all those selfish people that care about “What’s in it for them only “sooner or later. If not on this earth maybe when your time is up.
Hopefully all the CEO’s at GM, Chrysler and Ford making the mega bucks smelled the coffee finally. I know they finally remodeled their cars but they are about 20 years too late.
I'm no rocket Scientist or mechanic.
The 40-50 mile even 100 mile to a gallon cars and trucks should have been on the market over 30 years ago. We know that the technology was bought up or being held back from the American public.
Shame on all you money hungry selfish people.
Stop robbing the people of one of the greatest country on this earth of are right to live, have a roof over our heads, food on the table, a job to feel worth something, our health and stop trying to make America a third world country.

bob shepard

November 24, 2008 12:36 AM

Mr Mitt you are right.Sure those poor old soulS earning 77 bucks per hour do not agree.They just do not get it mr MITT. IN 1994 I WATCHED THE MOST DISGRACEFUL AMERICAN PRES NAMED SLICK WILLY SIGN IN TO LAW A BILL CALLED NAFTA.It means no american factorys taking applcations.3 million of my fellow american legal workers lost their jobs and here 14 years later still factories are closing It was called THE AMERICAN TEXTILE TRADE OUR GOV ANSWER MORE UNFAIR TRADE AGREEMENTS AND LAWS THAT TIED THE AMERICAN COMPANY OWNERS HANDS. YES THE DEMORATS ARE GOOD AT TALKING. TALKS CHEAP SO NOW ALL YOU CRYBABIES RIDING IN YOUR OVER PRICED AMERICAN BRAND CARS MADE WITH FENDERS FROM MEXICO TRANS FROM INDIA MOTORS FROM CHINA TIRES FROM VEITNAM LISTEN UP.WHILE YOU WEAR YOUR BANGLEDASH MADE SUIT ON YOUR NEXT JOB HUNT SHUT UP YOU DID NOT GIVE A DAM ABOUT THE PLIGHT OF THE AMERICANS HERE IN THE SOUTH AND NEW ENGLAND NOW RUT HOG AND CRY FOR ME I DRIVE A VW

Shawn Hill

November 24, 2008 1:46 PM

Taylor Prince stated "It's always easier to find fault in someone else's plan, than to face the critics by coming up with one of your own. Instead looking for problems why don't you spend a little while finding solutions."

I think I agree with you if you are referring to Mitt Romney finding faults but offering no solutions. All the solutions that Romney offers are ones that especially GM and Ford are already undertaking (paring the workforce, trying to get out from under the weight of healthcare costs and pension funds for retirees, investing more in R&D, ...).

Yes, those plans have yet to show results but there is light coming at the end of that tunnel in about 12-18 months (especially the retiree benefits funding being taken over by the union).

Beyond that Romney is offering nothing, only b*tching and moaning over the automakers failures to turn things around instantly.

As for David, great article showing the difficulty in understanding the complex nature of these issues. It's easy to see why Romney doesn't understand the problems that are occurring and how Washington has been partly to blame (forcing more fuel efficient vehicles to be made years ago ...)

dw

November 24, 2008 6:16 PM

lets see, if you start with a decidedly gibberish number of $73 an hours in labor costs (which is not what a UAW worker gets by any stretch of anybody but an anti-American worker ideologue), and the average number of hours per vehicle being 21 hours, you get a labor cost of about $1533 per vehicle. Now if you look at what rebates the car companies give, of about $3000, which sound bigger? Now as to what they build, as opposed to what consumers are buying. it seems that all of the car companies are having major problems. Foreign car companies are having to store large numbers of cars at US ports (in numbers that have never been done. by all of them Japanese, European, every one) because they aren't selling. One of them, has a truck plant in Texas, that has been shutdown several times this year. Because sales have collapsed. so they are all in big trouble. The Europeans are talking about doing loans to their car companies just we are. And who knows, the Japanese might also be doing it (we just don't know yet!). have these companies made mistakes. yup no doubt. but are they the cause of their current circumstance? not really, if you want to blame some one, I would say it was WALL STREET. they made this mess. they are the ones who destroyed wages. they are the ones who leveraged the credit crises into a disaster. and they seem to get bail outs. in the amount of 7.4 trillion dollars. and they are pointing at the car companies? with what credibility to any claim of management capability? they who made the worse mess in 60+ years. and we haven't finished it yet

mhs

November 25, 2008 6:49 AM

Second great piece from Kiley, helping to set the outside pundits straight. This is a scary big issue, for a scary big business, and as typical in any crisis situation there are too many talking heads tossing out shaky facts and superficial solutions.

Bottom line -- the car makers (and particualrly Ford where I work) -- have been racing to fix their businesses for five years now. Funny thing is, the government and the so-called 'leaders' in this country don't seem to understand that. They are late to the party and don't know how to help.

Good stuff, David. Thanks for playing the role of truth police.

Mike Calcagno - GM Employee

November 25, 2008 6:45 PM

Dear Mr. Kiley,

As a 23 year GM employee, I would like to say thanks for your support
of our company. I thought that your article on the editorial by Mitt Romney
was on the mark. However, over the last several weeks, I've heard a lot
hooha about how GM, Ford, and Chrysler have done all of this to themselves. Like you, I believe that our management has made some mistakes, but here's a
question for you framed around a comment. We have built millions of flex-fuel vehicles over the last few years. Sold quite a few of them as well. Here in Southern California, the only place that I know of that sells the ethanol (flex-fuel) is in El Cajon, down near San Diego. Now, I don't know about a lot of folks, but to drive 85
miles to fill up the tank just doesn't make sense. So, when you put that
together with all the electric vehicles people say they want us to build, and
hydrogen vehicles that people say they want us to build, here is the question.
Where is the infrastructure to support those technologies? Wouldn't you agree
that it doesn't exist? Perhaps you could pose that question to Mr. Romney and rest of the naysayers.

It is really maddening to me that everybody is willing to cut off
their noses to spite their faces. Silly people.

Again, thank you for your support, and have a Happy Thanksgiving.

Best regards,

Mike Calcagno Sr.

In God We Trust

Mike C. - GM Employee

November 26, 2008 6:46 AM

Dear Mr. Kiley,

As a 23 year GM employee, I would like to say thanks for your support
of our company. I thought that your article on the editorial by Mitt Romney
was on the mark. However, over the last several weeks, I've heard a lot
hooha about how GM, Ford, and Chrysler have done all of this to themselves. Like you, I believe that our management has made some mistakes, but here's a
question for you framed around a comment. We have built millions of flex-fuel vehicles over the last few years. Sold quite a few of them as well. Here in Southern
California, the only place that I know of that sells the ethanol
(flex-fuel) is in El Cajon. Now, I don't know about a lot of folks, but to drive 85 miles to fill up the tank just doesn't make sense. So, when you put that together with all the electric vehicles people say they want us to build, and hydrogen vehicles that people say they want us to build, here is the question. Where is
the infrastructure to support those technologies? Wouldn't you agree
that it doesn't exist? Perhaps you could pose that question to Mr. Romney and rest of the naysayers.

It is really maddening to me that everybody is willing to cut off
their noses to spite their faces. Silly people.

Again, thank you for your support, and have a Happy Thanksgiving.

Best regards,

Mike Sr.

In God We Trust

Marilyn

November 26, 2008 11:26 PM

I also disagree with the comments about Detroit only lagging in hybrid technology. How about plain old, unsexy reliablity-technology. We had a Honda Accord for 10 years before we needed to fix anything. Our Explorer had a major problem in the first 2.5 years, then another one a few years later. Both cars were bought new. The Ford was my first and last American car. We replaced it with a Volvo (owned by Ford, but still a Swede) and it gets way better gas mileage, granted it's a 2.5 liter 5cyl vs the 4.0 liter v6 of the Ford, but the Ford got 15 mpg. Period. City/highway - it was the same. The Volvo gets 16 in town, and 23 highway. I know it's a smaller engine, but I think it's great for an SUV that's not even a hybrid. And I bought it 2 years old, and bc it's a foreign car, I wasn't worried about buying used, like I would American.

PacificGatePost

November 27, 2008 2:47 AM

After Romney and the rest of the rhetoric ends, there is little choice but to bail GM and company. But make it a deal that has teeth and common sense.

FORGET CHAPTER 11. Here is the type of plan Congress should consider >

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Trying something outside the box like this, is the only way to save the U.S. Auto Industry.

L. Robertson

November 27, 2008 9:37 AM

Sorry Mr. Kiley, Romney makes sense. He is asking for re-structuring of Detroit's auto industry. Our government will be in financial chaos if we bail out Detroit to the degree you suggest. It is as simple as that. Why should we all suffer? Union costs, especially related to medical insurance have been too high in this competitive market. Let the market work fairly.

FROM KILEY: Chaos? You don't explain that. Simple? Not so much. You are blaming the union for the high costs of medical coverage? Perhaps you would like to examine the failure of Washington to reform the heslth system, which makes all of American business uncompetitive in costs with the rest of the world. The idea of employer managed healthcare is one of the most ludicrous ideas to come down the pike in the history of American business. Exactly, what is the sense of one's employer being in charge of making sure its employees have health coverage.

craig

December 8, 2008 5:16 PM

Romney is a business genius!!! It was very interesting hearing what he has to say about the auto industry. It will be interesting to see what happens. Hopefully, whoever makes the big decisions will do the best for the industry and our great country!!!

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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