Let Detroit Go Bankrupt

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2&rss

by chaostheory • 18 years ago

158 188 18 years ago

nytimes.com

pchristensen• 18 years ago

Didn't notice that it was written by Mitt Romney. Interesting twist.

terpua• 18 years ago

A great pitch to become the new car czar.

ckinnan3• 18 years ago

The last thing America needs is another federal "czar," especially for specific product sectors. The Soviets lost, remember?

antidaily4• 18 years ago

I'd rather bailout GM and Ford, who are not just hurting because of bad business decisions but also because of the credit crunch and high gas prices then, say, Bear Stearns.

fallentimes16• 18 years ago

This might sound crass, but companies who knowingly and actively pay people to do nothing on a perpetual basis deserve to die:

http://www.detnews.com/2005/autosinsider/0510/17/A01-351179....

antidaily4• 18 years ago

Ok, but how about the hundreds of small businesses and suppliers that depend on the Big 3 for work?

dionidium2• 18 years ago

We can probably all agree that's it's silly to require that workers play dress-up and come to a non-existent job every morning.

But, assuming that requirement were dropped, you haven't exactly explained why it was wrong of the workers to ask for a piece of the (extraordinarily high [0]) earnings the company enjoyed at that time, or why it was wrong of the company to pay it.

Am I wrong to assume that the company thought it to be the best terms they could negotiate at that time? What should the union have done? Accept less than they could negotiate for? What should the company have done? Insist on more favorable terms even if the cost of a protracted labor dispute were actually more expensive?

I keep hearing people refer to outcomes that appear to be the natural result of difficult negotiations in strictly moral terms. This seems silly. Help me understand why I'm wrong.

[0] http://www.mlive.com/business/index.ssf/2008/09/a_brief_hist...

fallentimes16• 18 years ago

The entire time I read this article I found myself nodding in an agreement. I found myself doing the exact opposite during Romney's campaign.

As a Detroit native - and this is hard to write - the car bailout should not happen. GM, Chrysler & Ford are currently nothing more than welfare vehicles. Lots of people will go bankrupt and lose their jobs (my Dad already has), firms will die and Detroit will be in absolutely awful shape. But right now they're just prolonging the inevitable and wasting taxpayer money.

LogicHoleFlaw• 18 years ago

Romney has a proven record of turning around sinking ships. Both the Bain Company and the 2002 Winter Olympics were in bad shape when he took the reins in 1990 and 1999 respectively. He fixed both of them and remade them into viable ventures. I'm quite apt to take his word when he says a managed bankruptcy is the best option for the US auto industry.

crabapple7• 18 years ago

and one wonders why bankruptcy is suitable for any other company in america, including airlines that have gone in and out of bankruptcy numerous times over the years...yet this same option is not permissible for the big3?

this is exactly why ch.11 exists - to allow freedom to restructure

hugh2• 18 years ago

Romney has a proven record of turning around sinking ships.

Was that a deliberately mixed metaphor? Turn around a sinking ship and all you get is a wreck which faces in the other direction.

hooande2• 18 years ago

What does Romney stand to gain if the big three go into a "controlled bankruptcy"/government take over? If they fire all the executives at those companies as he suggests, will Bain Consulting make a lot of money guiding the automakers through a restructuring? I don't want to sound conspiratorial but it is convenient that he's publically expressing opinions like this while closely tied to a company that does business consulting.

jimbokun• 18 years ago

"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."

Unions will not take management seriously until this happens.

However, I also don't understand how people who constantly argue that U.S. wages must continually fall for the sake of corporate competitiveness think that the U.S. won't collapse without some kind of middle class. And if this seems hyperbolic, please consider the effect of inflation, rotating asset bubbles, decreases in health care affordability, and rising unemployment. Without some kind of wage growth above inflation, I don't see how a real middle class can survive. Perhaps there are specifics in this case that warrant some reductions, but it seems to be the same argument any time an industry gets into some kind of management induced trauma.

bokonist• 18 years ago

Without some kind of wage growth above inflation

The key is keeping inflation down. Run a sound monetary policy and keep a constant stream of productivity improvements in all sectors, so that the purchasing power of a dollar continually improves.

chris114• 18 years ago

And recently today the heads of GM and Ford both refused to take a one dollar annual salary as Lee Iacocca did when Chrysler was bailed out in the 80's. So I really don't see top management in either Ford or GM to do anything to symbolize sacrifice.

Tichy4• 18 years ago

It is probably just that, though, a symbolic sacrifice, not a real sacrifice? I suppose they still get their stock options, boni and what not.

Locke2• 18 years ago

It baffles me that we'd blow 700 billion bailing out financial institutions that caused our economic problems. Money that's now going towards bonuses and acquisitions instead of buying "toxic assets" as originally intended. Toxic assets that were created by these same wall street companies.

As we save the companies that crippled the credit markets, we have no interest in spending a fraction of that same amount of money helping the companies most negatively effected by the condition of those same credit markets.

I'm sorry, but I don't see anyone buying a car from a manufacturer in bankruptcy. I think bankruptcy will be the end of the American auto manufacturers. The resulting damage will dwarf the 25 billion a bailout would cost.

crabapple7• 18 years ago

are you trying to tell me that gm is simply a victim of the credit crisis???

why would a bank loan them money now?? aren't we all about responsible lending now?? lending money to gm is the corporate equivalent of a subprime loan. we don't want banks making subprime loans anymore.

Locke2• 18 years ago

Yes. How do people buy cars? On credit. Harder to get credit means fewer people capable of buying cars. A bad economy means fewer people buying cars. GM et al, did not create the credit crisis. They did not create the bad economic conditions.

But we want them, and more importantly, all the people working in that industry to suffer? Honestly, I can't imagine how letting them fail won't cause more than 25 billion in economic damage.

uuilly• 18 years ago

David brooks explained the difference really well. The bailout of wall st. Was a bailout of the entire financial system. If it didn't happen comapnies would not be able to borrow any money. Forget who it's from. If we don't bail out the big three we will all still be able to buy tons of different kinds of cars. (Can't send link from iPhone)

fallentimes16• 18 years ago

Small businesses were affected by the financial crisis more than people realize. Businesses with long sales cycles (e.g. media companies, advertising companies) often use commercial paper to finance their short term recurring financial expenses (payroll expenses, rent, etc).

No bailout, no commercial paper, no paycheck.

crabapple7• 18 years ago

one must ask why a waitress at denny's who makes minimum wage and has no healthcare must bail out union workers at gm who make 8x the wages, do less work, have ZERO DEDUCTABLE healthcare (do you? i doubt it), and full pensions.

or why should a succesful worker at honda in ohio subsidize not only a failed competitor, but in essence have his own taxation used to undermine his own hard work?

as for saving jobs and investment...most of the suppliers are already on death's door if they only rely on orders from detroit. investors have already lost 95% of their money on avg...nothing can reverse these losses

in the end the govt cannot give the big three their reputations back. lost reputation is why people do not choose these cars even though they are now comparable in quality. barak obama cannot force me to buy a buick

blackguardx• 18 years ago

This post smacks of jealousy. What is wrong with zero deductible healthcare? I don't fault someone for trying to climb society's ladder. I want everyone in America to be able to earn a living wage.

Being in a union doesn't make one lazy or overpaid. How do you over pay someone anyway? Who deems what a job is worth to society?

It is very unfortunate that the big three made the agreements they did, but they made them. They should be allowed to fail. All this talk of a bailout just furthers the crisis. When things start to look more desperate, the UAW will renegotiate. If they don't, the organization will cease to exist.

What I worry about are all those retirees who depend on the pensions they were promised.

yummyfajitas5• 18 years ago

Person A, a waitress at Dennys, making about $8-10/hour with high deductible health care.

Person B, an auto worker at GM, making $30-40/hour with zero deductible health care.

[edit: see response to this post, auto worker gets $73/hour.]

The bailout: tax person A in order to help person B, with 3 large corporations taking a cut of the proceeds. Does this make any sense?

Incidentally, the original poster did not describe union workers as either lazy or overpaid.

[edit: forgot to mention, it's actually very likely that the waitress does not pay taxes at all. So more realistically, the waitress should be replaced by someone in the $20/hour neighborhood.]

mdasen3• 18 years ago

Interesting question: who deems what a job is worth to society?

Many things: First, we all do. As a simplistic example, would you hire me at $50/hour to patrol the front of your house for squirrels? No. No matter how diligent or hard-working I was, that function is not worth $50/hr to you. In fact, it may be worth nothing at all. A little less simplistic: would you keep me on fulltime staff to clean your apartment or house at $100,000 per year? Probably not. If I charged $1,000 per year, you probably would. A clean apartment/home is a good thing (by most people's standards). It has value. How much value? Well, that depends on how much people are willing to part with for it. Maybe you would rather waste your time cleaning. Maybe I would be idle most of the time because your place isn't that big and therefore it doesn't justify fulltime staffing.

Second, alternatives. I touched on this already a little with your substituting your labor for mine, but it goes even further. Can the process be mechanized? In the era before computers, there were still things like directories and it must have been a damn tedious process alphabetizing all those names. The person was, no doubt, hardworking, but as computers came along and could do the job quicker and more accurately, well, that person no longer had function. Yes, the value of sorted data didn't change, but the cost to acquire sorted data did change while that person didn't (or maybe they did and became a valuable computer technician or something).

Third, output. What is its intrinsic value. A car has intrinsic value, but it also varies by person - a car is worth more to the President than it is to me. He's busier, I can take the subway without fear of assassination, etc. The more expensive a car is, the fewer people will have it. For the most part, producers don't get to price discriminate - if Bill Gates goes to the Mazda dealership he'll get a similar price that I get even if the car is worth a lot more to him.

Forth, competition. Are there other people that are willing to do the job for less? I'm guessing beer tasters don't get paid well, but I'd also wager that breweries don't have trouble finding people for the job. Likewise, if competitors are more efficient (either companies or other workers), it makes your labor less valuable. If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less.

Fifth, other goods. Economics is about allocating scarcity. Many try and argue that we're not an economy of scarcity anymore and that we have enough for everyone and that it's just a corrupt capitalist system that prevents that from happening. Then they create cost of living calculations for a living wage that consider someone without cable to be in dire poverty. Face it, we like things. If we could all live without things (from TVs to medicines), we'd be fine. So, the question is: on a per dollar basis, how has the automobile fared against other things we can spend our money on? For me, on a per dollar spent basis, my computer is much more valuable. Are people moving a certain percent that they used to spend on cars toward CDs or TVs or computers or cranial piercings? I have no idea, but we all allocate our budgets in ways that we hope will increase our happiness. People's tastes change, society's tastes change. Portable radios do positively affect your happiness and are cheap (say, $20), but people seem to have widely pronounced that MP3 players (at 5-10x the cost) positively affect their happiness at a rate greater than that 5-10x increase. Or they're just idiots that don't know what to do with money.

I could go on, but I think you get the point. It's a truly fascinating topic. In the GM case, there are some neat applications to see.

1. When GM, Ford, and Chrysler were pretty much the only auto makers, the amount of competition was less which meant that consumers would pay more and fewer units would be shipped. If you want to calculate how this works, look up the cournot/nash equilibrium. As the car companies were selling at higher margins and ignoring the poorer people, labor could demand more money since the car companies were making more money per unit of labor used.

2. Other firms with lower labor costs also became more efficient. Toyota makes cars faster combined with a lower cost per hour. That means GM's labor is worth less money.

3. The value of output might be fluctuating. Here is where I'm spouting complete BS. As gas prices rise, the intrinsic value of a vehicle declines. Americans also seem to be having a shift in their perception of public transit and as their view of it becomes more favorable, the value of a car decreases. However, as most people are suburban, a car can still be a lifeline.

It's late. I'm done. Hopefully that was interesting. It wasn't meant to have any view pro or con in it, just more of a view into how prices get set and how we value things.

wyclif• 18 years ago

You mean envy, not jealousy:

Ordinary language tends to conflate envy and jealousy. The philosophical consensus is that these are distinct emotions.[2] While it is linguistically acceptable to say that one is jealous upon hearing about another's vacation, say, it has been plausibly argued that one is feeling envy, if either, in such a case. Both envy and jealousy are three-place relations; but this superficial similarity conceals an important difference. Jealousy involves three parties, the subject, the rival, and the beloved; and the jealous person's real locus of concern is the beloved—the person whose affection he is losing or fears losing—not his rival. Whereas envy is a two party relation, with a third relatum that is a good (albeit a good that could be a particular person's affections); and the envious person's locus of concern is the rival.

http://plato.stanford.edu/entries/envy/

Prrometheus3• 18 years ago

Detroit fills Democratic Party campaign coffers.

And before anyone says its a non-partisan thing, look at where opposition to this bailout and the previous one came from. That's right: the guys we just voted out for being war-mongers and Big Brother supporters.

Ain't democracy grand?

prospero2• 18 years ago

40% of Democrats opposed the original bailout package, compared to 66% of Republicans. That's a difference to be sure, but the vote was obviously not down party lines. Furthermore, Bush was a strong supporter of both packages, and was vocal in his disappointment when the first failed to pass.

Facts exist independently of your opinion; you don't get to make them up to fit your argument. Please try to remember that.

evgen2• 18 years ago

FWIW, a large part of this problem has already been solved. You may not have noticed it, but a while back the UAW made a deal with the big three that in exchange for a large cash payout they would take over retiree pension and post-retirement healthcare obligations.

sethg6• 18 years ago

...and, if I understand correctly, because Detroit made that payout, they are now in a poor cash position, which means that the credit crunch is putting a very big strain on them.

mhartl• 18 years ago

I basically agree with you, but it's worth noting that your hypothetical Denny's waitress would pay no federal income tax (though she would pay the payroll tax), and would probably qualify for the Earned Income Tax Credit. It's really the professional wage earners (doctors, lawyers, etc.) pulling in a few hundred grand who get the shaft.

ewanmcteagle• 18 years ago

$8/hour = $16k per year (roughly). Since this is greater than the standard deduction you will not be avoiding federal income tax at this level.

sethg6• 18 years ago

Because if the Big Three go under, a very large number of workers (folks working for the Big Three and for their suppliers) will suddenly be collecting unemployment insurance instead of paying taxes; given the current state of the economy, they may be collecting it for quite a while. So it would be cheaper for the government to keep those employers afloat.

The obvious counterargument to that is that the auto companies could take their $25 billion and still go under.

The counter-counterargument is that even if that happens, it would be better for everyone if they went under a few years from now, when hopefully the rest of the economy will be in better shape.

crabapple7• 18 years ago

Because if the Big Three go under, a very large number of workers (folks working for the Big Three and for their suppliers) will suddenly be collecting unemployment insurance instead of paying taxes

and they will also paid in taxes if bailed. so GM is going to become a giant money laundering operation for the IRS?

cut out the middleman and put them on unemployment...then they can actually find PRODUCTIVE work

mchristoff7• 18 years ago

it really disgusts me that this comment has been upmodded so much. it reeks of overgeneralization, ignorance, and hyperbole. it's very easy to sit on your high horse and talk about hypothetical denny's waitresses, but a little harder when this actually effects you and your loved ones.

my father worked his ass off for GM for more than 25 years, not to mention driving 100 miles each way for the last 10 so his family didn't have to move. when he retired a few years ago he made $25/hr + the overtime which he always worked so i could go to college. $25/hr an hour is not 8x of your hypothetical denny's waitress, it's what we call a "living wage". maybe your denny's waitress worked harder than my father, but assumption that every UAW worker somehow is swimming in a money bin like in scrooge mcduck while the rest of the country is toiling in the coal mines is false.

i'm not defending the auto industry here, nor do have i decided whether it would benefit my country or my family to bail them out. i think management made some terrible decisions (see: suvs + $100/barrel oil), and i think UAW bargained for some deals that were unsustainable. heck, i'm not saying you should buy a buick... i'm sure as hell not. but why do you need to degrade the sacrifice of honest people to make your point?

ars3• 18 years ago

You're talking like his job was an entitlement. Companies go bust and people lose jobs, it happens a lot.

The reason people are talking UAW workers that way, is not because they begrudge the individual worker like your father - they don't.

It's because the car companies were not allowed to fire or lay off people as they wished, which gives a very strong impression of entitlement and job guarantees amongst UAW workers that no one else in america has.

If you got rid of that, and allowed car companies to hire and fire and set wages as they desired, people wouldn't be so opposed to the bailout. Personally I would support the bailout only if the company became non-union. So long as they stay unionized they will never survive, and the bailout will be wasted money.

As a whole UAW was very destructive to the auto business - not allowing a company to fire people, or change wages, is a great way to destroy a company - and they succeeded.

100 miles each way? That's about 4 hours of driving each day, add in overtime, and there's nothing left to your day. Why not find a closer job?

thomasmallen• 18 years ago

I'm disgusted as well because this is yet another manifestation of elitist resentment against systems in place that assist the middle and lower classes.

Mythical "Welfare Queen," meet the mythical "UAW King."

astine8• 18 years ago

It really disgusts me that this comment has been upmodded so much. it reeks of overgeneralization, ignorance, and hyperbole. it's very easy to sit on your high horse and talk about hypothetical denny's waitresses, but a little harder when this actually effects you and your loved ones.

Very true. The dangers many Americans face as a result of all this are real, as are the hardships that prompted folks to adopt these broken systems in the first place. However, that doesn't change the fact that there are very serious problems with the system and that the hardships could be made much worse if they are not addressed.

blurry2• 18 years ago

You know what disgusts me? Your complete blindness to how good your father had it. As a not-so-recent immigrant to the US, I've found it laughably easy to have a good life here. I am not talking about myself since I came at 25 and spoke enough English to get by. I am talking older relatives and their friends, people well into their 50's who did not speak a word of English. There is an absolute wealth of opportunities - classes at community colleges that you can take for near free, paying jobs where you have plenty of time for studying while taking care of the elderly for example, charitable organizations that assist you in everything from relocation to getting jobs, government programs that give you bridge money to get you on your feet, and so on.

If you think your father had a rough life, you are truly a spoiled brat. My father almost starved to death as a teenager during World War II, almost died from tuberculosis as a young man, shared a small one-bedroom apartment with 5 people as an adult, and was forced to abandon even that little due to ethnic conflict. Your father on the other hand, had it so easy that he could afford to put his kids through college and still retire after just 25 years of work. Oh, excuse me, I forgot. Your dad had to endure a 2-3 hour commute because it would be so traumatizing for his kids to switch schools once.

Your father and his buddies are who needs to get off the high horse, my friend. They've worked in a little bubble with their cushy guaranteed pay and benefits for too long. It's about time they ventured out on their own into the big bad world that the rest of us happily inhabit.

newsycaccount4• 18 years ago

http://www.prospect.org/csnc/blogs/beat_the_press_archive?mo...

You are claiming that they are making 10x as much as a Denny's worker, before their benefits? They make $28 an hour before benefits (about 3 or 4x a Denny's waitress after tips). Including benefits they are making $41 an hour. That is still no where near your crazy ass 10x number, especially considering that you can hardly claim their pensions are worth the full $7 as there is a significant chance these companies will go bankrupt and they won't ever see it. If the market could sell employees an annuity in exchange (assuming the bankrupcy risk for itself), it would probably only offer a few cents on the dollar.

Xichekolas2• 18 years ago

I'm wondering where these GM employees with zero deductible healthcare are. My dad is a retiree, and the last time he had zero deductible healthcare was in 1998, when it was much cheaper for the company.

Nowdays he pays 100% of his office visits and has some yearly deductible for other things. It's still a good health plan, but it's not exactly gold-plated.

GM has done some incredibly stupid things, even my dad thinks the job bank was ridiculous, but they have made a lot of changes in the last 5-8 years, and were probably going to glide into something new and better had the market for cars not fallen apart.

Now I'm not saying I support a bailout, I still think Chapter 11 probably makes the most sense, even if it means my dad's pension might get cut. I'm just trying to point out that a lot of these things that people bring up when they talk about GM (job banks, super health insurance, high wages) are issues that are no longer the case. When my dad retired, they already had his plant converted to $14/hr non-union workers.

mchristoff7• 18 years ago

This is exactly my father's situation. Zero deductible health care, huh? Maybe 10 years ago, but certainly not now.

Demononizing honest people based on stereotypes that people cling onto to support their perceived notions does not solve the real problem.

jmatt• 18 years ago

It's not the waitress at denny's - there is a very good chance she pays no federal taxes.

No, it's the engineers, management and entrepreneurs of all the successful companies in the US that are going to pay for the bail out(s).

I agree let them go bankrupt or even a managed bankruptcy. They need to get those liabilities off the books.

barak obama cannot force me to buy a buick

This is how much of the world works, subsidize the local car companies and tax and tariff the foreign car companies. Currently the foreign car companies are essentially on the same playing field as foreign car companies in the US. Hopefully it will stay that way.

fakeslimshady• 18 years ago

There are probably 100s of industries and sectors imploding in this depression (folks hitech is getting there) that don't have lobbying power like the Autos. Instead bailing out Autos or Wall Street, this money needs to bailing out the wave of people that are going to enviably lose there jobs no matter what plan is done. But we should get something for the useful and lasting for the money - build Nuclear Power Plants, build a 100Mbs internet like they have in Japan/Korea, etc.

davidw• 18 years ago

Policy? Check. Romney? Check. Politics.

http://voxeu.org/index.php?q=node/2574 is the best take on it that I've seen so far, though, if we really have to go there (we don't).

fallentimes16• 18 years ago

Great read - thanks for sharing. It's probably the best take I've read to date. The real question is: who can make it happen?

mannylee12• 18 years ago

This coming from the NY Times... They better take a look in the mirror.

teaquaffer• 18 years ago

I don't follow- what do you mean?

patio11• 18 years ago

Presumably, he mean that the NYT is a floundering company which has been devastated by a refusal to adapt to new business realities over the last decade.

5 years ago their stock was trading at $47. Now it is at $6.

http://finance.google.com/finance?q=NYSE:NYT

(For what it's worth, if they collapse I wouldn't bail them out, either.)

chris114• 18 years ago

I agree, the big three automakers should fail. They produce cars that people won't buy and are overpriced, and unlike the financial industry, they aren't too big to go bankrupt. I also don't see that they have a viable plan to turn the company around. In the recent congressional hearings, GM blamed their troubles on the financial crisis.

netcan2• 18 years ago

One thing that isn't mentioned here is the begger-my-neigborness of all this.

These same companies lobby multiple governments for grants & incentives to operate locally via their local subsidiaries. Then when they get it they lobby another govenrment citing that they cannot be expected to compete at a disadvantage to their sister/paretn company.

flavio87• 18 years ago

He's right.

mattmaroon6• 18 years ago

Why didn't he talk like this on the campaign trail? If he'd done that instead of trying to fist bump every black guy he saw while yelling "who let the dogs out" he could have been the nominee.

jmtulloss3• 18 years ago

He gave plenty of economically motivated speeches, both on the campaign trail and while he was governor. The media just covers the fist bumps.

nazgulnarsil• 18 years ago

After getting robbed by a band of thieves you know what's really important to talk about? How you think the thieves should divide up your stuff.

froo• 18 years ago

This seems like some common sense...

cant they just get some magic beans instead?

byrneseyeview• 18 years ago

I think we should allow the car companies to form a union. They can collectively agree that unless every single auto worker accepts $10/hour and no benefits, they all fire everybody. It would be very interesting to see how this works out.

jmtulloss3• 18 years ago

Who benefits from this scenario? Between the American people, car company execs, auto workers, and the government, this is a lose-lose-lose-lose plan.

olefoo• 18 years ago

Not if you are a professional negotiator or a lawyer. This would be full employment for lawyers.

newsycaccount4• 18 years ago

Since workers don't have the right to perform secondary strikes, why should automakers?

gaius• 18 years ago

If employee A has a grievance and employees B-Z strike, how's that any different?

hooande2• 18 years ago

The biggest problem with the detroit automakers is their high pension and medical cost burden. People are living far longer now than they were predicted to when the pension deals were struck in 1951. The Detroit automakers have an unbearable burden when compared to foreign car makers. This drives up their prices and effects all of the business decisions that they make.

The management at the big three auto companies hasn't been very brilliant or innovative, but I bet they've done just about as well as the management teams at comparably sized companies. Firing all of them would probably just cause a lot of chaos and waste decades of learning and experience.

This financial problems they are facing have more to do with the credit crisis than making the wrong kind of cars. There is this insinuation in that media that if Ford had just made more eco-friendly cars then everything would be ok. There is still plenty of demand for american cars and trucks (especially in the american south). It seems like they just need some time and money to re-negotiate things with the unions and this can be worked out.

ensignavenger4• 18 years ago

Romney's father turned around a failing auto company. Romney has turned around a ton of failing companies. I think I would take his advice on this one!

sh1mmer• 18 years ago

The bottom line, if Detroit wants money it needs to justify why it's not just going to sink it into the same failed structure it currently has.

Mitt makes some excellent points, it's not that we shouldn't support this industry, we should just do it with consideration and some sensible caveats.

Personally this argument goes for Wall Street as well. Not that it's something Mr Paulson seems to understand.

lallysingh• 18 years ago

Can we just buy Honda out and give them GM?

fauigerzigerk• 18 years ago

All that talk about unions misses one much more systemic point. It's that linking social benefits to individual employment relationships is a bad idea. It creates dependencies that make the system inflexible. It reduces worker mobility. It creates long term obligations that individual companies, not matter how large, can never garantee.

It's a paternalistic model that puts companies in the position of families or states that care for people based not on merit but on human needs and dignity. Both are important but mixing them creates a conflict of interest.

Money is flexible. Use money to pay people for work. Not health plans and pensions, not stock options, just money and people can go and buy all of the former. Keep things simple.

lutorm2• 18 years ago

Yeah, this is one of the arguments for universal healthcare and government-managed retirement benefits.

chris114• 18 years ago

They just canceled the bailout vote, so it looks like Bush will make the decision now.

LPTS• 18 years ago

Mitt Romney. I'm supposed to take anything this asshole says seriously? Why?

Next up, Sarah Palin on Russian Policy, or Bill Kristol's bedwetting?

mnemonik• 18 years ago

Sarah Palin doesn't know anything about foreign policy. Mitt Romney on the other hand is a successful businessman. This means he knows what he is talking about here.

joubert2• 18 years ago

They make shitty cars anyway.

Tritis2• 18 years ago

http://www.npr.org/news/specials/gmvstoyota/ GM's problem is that it costs them money to make a car.

Profitability per Vehicle Source: 2005 Harbour Report GM: Loses $2,331 per vehicle Toyota: Makes $1,488 per vehicle

If GM continues to lose money on each vehicle sold, how wil a bailout help in any way?

Dilpil4• 18 years ago

That figure is meaningless, it is amortizing the total operational cost of GM over each vehicle sale, when the total operational cost of GM is not directly proportional to number of cars sold- not by a long shot. The article is falsely portraying that as the average sale price per unit minus marginal cost per car, which it is not.

bpyne2• 18 years ago

One detail I don't remember seeing in the Op-Ed piece was health care differences between countries. In the countries our auto companies compete against, I believe all of them have health care at the national level. Right there, you have a major cost businesses in the US are absorbing.

jdminhbg• 18 years ago

In both Japan and Germany, health care is mandated by the government but paid for by the employer. See e.g. http://www.nchc.org/facts/Japan.pdf

bpyne2• 18 years ago

Thanks for the link. I read the one on Germany as well.

It seems more like a combination of employer and employee payment with the governments being involved as a single payer system - in the case of Germany.

aswanson• 18 years ago

Yeah, let them, if for anything the nonsense they pulled with this: http://en.wikipedia.org/wiki/Who_killed_the_electric_car

nradov• 18 years ago

I see that GM paid out a dividend of $0.25 per common share just a few months ago on 05/14/2008. The problems were well underway by then, yet they chose to piss away about $140MM in cash. That alone should disqualify them for a bailout, at least as long as the current management and board remains in place.

http://finance.yahoo.com/q/hp?s=GM&a=04&b=14&c=2...

At least Ford had the common sense to cut off dividends in 2006.

Let Detroit Go Bankrupt

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