Mitt Romney's NY Times Op-Ed On the Automakers: Dead On

Mitt Romney wrote an Op Ed in Wednesday's NY Times on the Auto Industry that is a must read; I won't say much about the specifics other than to say that I agree with him 100%.

I will say that he brings up a point or rather a "way of thinking"  that should be applied to all other bailout efforts, rescues, etc, etc, namely that the architects of such solutions must ask themselves: "are we investing in change or are we simply maintaining the status quo?

Whether it's homeowners or corporations it doesn't make much sense for the Government to inject funds into the maintenance of situations that are either broken and/or unsustainable, as all you're doing is throwing good money after bad and delaying the inevitable. Instead the Government should be in the business of making investments as opposed to providing hand-outs, investments that enable the party(s) receiving assistance to turn things around, repay the taxpayer and emerge stronger than ever.

There is no point in using taxpayer money to fund delay tactics.

Better yet look at it from the "Main Street" level: would you lend money to a fiscally irresponsible friend/relative/individual who was having trouble making ends meet, if they were just going to use the money to meet short-term needs, weren't going to change their habits, look for a higher paying job and you knew they had no real means of paying you back?

Then why are some folks calling for the Government to do the same for various companies and individuals who are in analogous situations?

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.

Comments

[mdmrjsds:]

Too bad he didn't get the nomination. He's the president we need now. Someone who has some business understanding. And executive experience. A crisis isn't the time to be doing on the job training.

Well, we have what we have. Maybe he'll pull it out. So far he doesn't inspire much confidence. Business as usual. That's *Washington* business as usual.

2008 Nov 20 11:47 AM

[John D:]

Now that it's getting down to the crunch can someone explain ONE thing to me, in a country where the government spends TRILLIONs on WAR in other countries (I realize it's to protect the US as well, but) why would the government not do as much at home to protect democracy & the industry that has been supporting a VERY large part of the country for a century now. Is it fair to bail out Wall St. (they finally found the weapons of mass destruction - right on Wall St.) and not the millions of citizens that will lose the taxpaying jobs that would help contribute to the taxes to cover the financial system failure. I find that much of the resistance is nothing more than the arrogance of certain senators who's states are not affected as much. If they feel that Toyota & Honda will contribute as much to their country than GM - Ford & Chrysler they are seriously mistaken - those profits SUPPORT their countries - Americans are just paying for it. Perhaps the question they should be asking is why North American Auto makers are not allowed to sell freely in Japan & Korea, maybe it's because those governments are not blinded by arrogance. If the North American governments had sought an EQUAL trade deal instead of a FREE trade - dump what ever you want here - deal, the Big 3 would have been sitting in a much different position now and actually be helping to pull the economy out of recession - "Buy an import and drive North America into DEPRESSION"

2008 Nov 20 11:51 AM

[tzvee:]

romney is a mouthpiece for slash and burn management. most of us regular folk (bloggers included) are part of labor and will benefit from any program that props up labor, yes especially when not prudent from management perspectives. so how in the world could you agree with even 1% of what romney says?

2008 Nov 20 11:56 AM

[I. Barr:]

Mitt Romney should be appointed as Czar of the bail out of the Big Motor Companies. As such he will control the money, replace management, negotiate with UAW and retirees and plan R&D and the future of these companies. Automobile US industry cannot be left in the hands of arrogant and selfish management or in the hands of UAW who milked the cow dry.

2008 Nov 20 12:03 PM

[slickvguy:]

The USA desperately needs people like Romney to clean up this mess by applying tough, no-nonsense strategies and tactics. it seems that nobody has any backbone left. Extremely difficult decisions have to be made. Everyone has to give. Nobody will be completely happy. Too bad. The Big Three got themselves into this mess - they have no leverage to demand anything. A fleet of corporate jets??? Are you kidding me? Sarah Palin those jets.

2008 Nov 20 12:10 PM

[jwohlf:]

Well, I think China and all the other countries lending money to the US to fund war and our insatiable desire for other countries' goods might come to the same conclusion. Why should other countries lend money to a fiscally irresponsible country who was having trouble making ends meet, if we're just going to use the money to meet short-term needs, aren't going to change our habits, balance our budget and you knew they had no real means of paying you back?

If we don't support/reinvent the few industries we have left, what will be the basis of our economy?

2008 Nov 20 12:12 PM

[anarchist:]

I thought the jerk that is in the White House now was a Harvard business school graduate? Do we need a more of the same, I think not.


On Nov 20 11:47 AM mdmrjsds wrote:

> Too bad he didn't get the nomination. He's the president we need
> now. Someone who has some business understanding. And executive
> experience. A crisis isn't the time to be doing on the job training.
>
>
> Well, we have what we have. Maybe he'll pull it out. So far he
> doesn't inspire much confidence. Business as usual. That's *Washington*
> business as usual.

2008 Nov 20 12:14 PM

[Jeff B.:]

I read the article, and while I disagree often with Romney on many political issues, I think he is 100% correct here. Some of the posts here show that labor is in just as much denial as the auto execs themselves. For the industry to survive there will have to be huge changes -- no tthe itty bitty weak kinds of changes we've seen from Detroit (both labor and management). The UAW and the big three need to decide this: Are the going to fly off into the sunset of bankrupcy in their private jets, or are they willing to make the kind of sacrifices needed to save the auto industry? IN the final analysis, it is the market that decides what a car is worth, and whether to buy it or not. Not GM, Ford, Chrysler, UAW, or Congress. The market has been voting "No" to these domestic cars in greater numbers every year. I wan tus to have an auto industry in ten years. Stop whining and start fixing. Anybody want to buy a slightly used private jet?

2008 Nov 20 12:16 PM

[pearl2k:]

If the car companies go, that's it. We fully cede our manufacturing base to foreign countries. GM & Ford have spent BILLIONS retooling in the last couple years to bring great cars with great technology to the market this year and next. Let's hope they can hang on.

However, N American operations for both GM and Ford are completely out of touch. Both companies do outstanding in Europe, and are successfully penetrating China, Russia etc. Amazing cars in other countries which leaves you scratching your head, why don't we get these cars. Well, NA can only make a profit selling high margin trucks. The union/labor legacy issue has to be dealt with. Where else can you go to work at 18, retire after 40 years, then have someone pay you to do nothing for the next 25? We live longer and our health care costs more. Defined benefit plans all across the country are going to be in the same boat. They have to go. It's a raw deal for workers, but that's a holdover from another era.

On Nov 20 11:51 AM John D wrote:

> Now that it's getting down to the crunch can someone explain ONE
> thing to me, in a country where the government spends TRILLIONs on
> WAR in other countries (I realize it's to protect the US as well,
> but) why would the government not do as much at home to protect democracy
> & the industry that has been supporting a VERY large part of
> the country for a century now. Is it fair to bail out Wall St. (they
> finally found the weapons of mass destruction - right on Wall St.)
> and not the millions of citizens that will lose the taxpaying jobs
> that would help contribute to the taxes to cover the financial system
> failure. I find that much of the resistance is nothing more than
> the arrogance of certain senators who's states are not affected as
> much. If they feel that Toyota & Honda will contribute as much
> to their country than GM - Ford & Chrysler they are seriously
> mistaken - those profits SUPPORT their countries - Americans are
> just paying for it. Perhaps the question they should be asking is
> why North American Auto makers are not allowed to sell freely in
> Japan & Korea, maybe it's because those governments are not blinded
> by arrogance. If the North American governments had sought an EQUAL
> trade deal instead of a FREE trade - dump what ever you want here
> - deal, the Big 3 would have been sitting in a much different position
> now and actually be helping to pull the economy out of recession
> - "Buy an import and drive North America into DEPRESSION"

2008 Nov 20 12:17 PM

[pearl2k:]

If the car companies go, that's it. We fully cede our manufacturing base to foreign countries. GM & Ford have spent BILLIONS retooling in the last couple years to bring great cars with great technology to the market this year and next. Let's hope they can hang on.

However, N American operations for both GM and Ford are completely out of touch. Both companies do outstanding in Europe, and are successfully penetrating China, Russia etc. Amazing cars in other countries which leaves you scratching your head, why don't we get these cars. Well, NA can only make a profit selling high margin trucks. The union/labor legacy issue has to be dealt with. Where else can you go to work at 18, retire after 40 years, then have someone pay you to do nothing for the next 25? We live longer and our health care costs more. Defined benefit plans all across the country are going to be in the same boat. They have to go. It's a raw deal for workers, but that's a holdover from another era.

On Nov 20 11:51 AM John D wrote:

> Now that it's getting down to the crunch can someone explain ONE
> thing to me, in a country where the government spends TRILLIONs on
> WAR in other countries (I realize it's to protect the US as well,
> but) why would the government not do as much at home to protect democracy
> & the industry that has been supporting a VERY large part of
> the country for a century now. Is it fair to bail out Wall St. (they
> finally found the weapons of mass destruction - right on Wall St.)
> and not the millions of citizens that will lose the taxpaying jobs
> that would help contribute to the taxes to cover the financial system
> failure. I find that much of the resistance is nothing more than
> the arrogance of certain senators who's states are not affected as
> much. If they feel that Toyota & Honda will contribute as much
> to their country than GM - Ford & Chrysler they are seriously
> mistaken - those profits SUPPORT their countries - Americans are
> just paying for it. Perhaps the question they should be asking is
> why North American Auto makers are not allowed to sell freely in
> Japan & Korea, maybe it's because those governments are not blinded
> by arrogance. If the North American governments had sought an EQUAL
> trade deal instead of a FREE trade - dump what ever you want here
> - deal, the Big 3 would have been sitting in a much different position
> now and actually be helping to pull the economy out of recession
> - "Buy an import and drive North America into DEPRESSION"

2008 Nov 20 12:17 PM

[Cuteguy65:]

I agree with Romney 100% ! To bail out the auto industry is throwing money into the fire. The American people deserve better. I do not trust those expensively paid executives to do the ring thing after they arrive in DC to plead for money in their private jets ! The US auto industry needs an overhaul and a turnaround in their management and R&D. Too long they did protectionist efforts to bloc envoirnmental issues than to improve their product. My sympathy goes to the labor who has diligently work hard in their jobs and those who retired should be given protection from this downturn. If the money is going to the workers and their retirement fund, I would support it. However to give money to those fat cat executives, who cannot even give agood show of being in need, I would object even one penny. They are the ones who ran the company to the ground. No kudos to them.


On Nov 20 12:16 PM Jeff B. wrote:

> I read the article, and while I disagree often with Romney on many
> political issues, I think he is 100% correct here. Some of the posts
> here show that labor is in just as much denial as the auto execs
> themselves. For the industry to survive there will have to be huge
> changes -- no tthe itty bitty weak kinds of changes we've seen from
> Detroit (both labor and management). The UAW and the big three need
> to decide this: Are the going to fly off into the sunset of bankrupcy
> in their private jets, or are they willing to make the kind of sacrifices
> needed to save the auto industry? IN the final analysis, it is the
> market that decides what a car is worth, and whether to buy it or
> not. Not GM, Ford, Chrysler, UAW, or Congress. The market has been
> voting "No" to these domestic cars in greater numbers every year.
> I wan tus to have an auto industry in ten years. Stop whining and
> start fixing. Anybody want to buy a slightly used private jet?

2008 Nov 20 12:32 PM

[goanywhere:]

pearl2k is right about the Unions. Why the hell should the tax payer fund the lavish pay and pension structure that the auto companies executives agreed with when operations in other countries are doing well with alternate pay and compensation structures? How rediculous are the executives for living lavish lives and holding onto luxury assets (such as private planes) and beg for money? Are they really that stupid?

2008 Nov 20 12:33 PM

[TEA:]

I agree with Mitt on every point except the pension, these retirement programs were promises made by the board of directors and executive management and should have been fully funded as the promises were made otherwise the companies should not have made the future commitment. To take that back now is complete dishonesty and lies to the workforce years ago. I like it no different to the Social Security promises made by our elected officials when they move social security into the general fund years ago and have spent every penny and put IOU’s in its place. At some point the corporate leaders , board of directors and elected officials that made these retirement promises and decisions to spend the money need to be held accountable as they said back when the promises were made "the people we are doing this for will not save for retirement so we will take care of them". “Boy Did They Take Care of Them” And now watch your elected officials will try to go after your 401K’s saying you don’t know how to invest in the markets so the government will keep you safe. Hold on to your wallet… Keep in mind that millions of workers saving small amounts add up to very large amounts that corporate management and elected officials’ can’t pillage fast enough all the while protecting their single very large estates making sure they never get touched.

2008 Nov 20 01:06 PM

[squidmark:]

I am part of labor, and I agree wholeheartedly with what Romney says. If you're part of labor, you want jobs for the LONG-TERM, right? Then, long-term, we need companies to be competitive and top-notch. Enabling their mediocrity by bailing them out of their bad decisions, rather than making them face the consequences of their behavior does NOT incentivize them to improve, and they will still lose long-term to other companies (including foreign companies) that DO improve/adapt to remain at the top of their industry. When that happens, one of two things will take place: 1) another government bailout to enable even further mediocrity, or 2) the bankruptcy of that company anyway, but taking down the billions of taxpayer dollars that funded the first bailout with it.




On Nov 20 11:56 AM tzvee wrote:

> romney is a mouthpiece for slash and burn management. most of us
> regular folk (bloggers included) are part of labor and will benefit
> from any program that props up labor, yes especially when not prudent
> from management perspectives. so how in the world could you agree
> with even 1% of what romney says?

2008 Nov 20 01:11 PM

[squidmark:]

I *somewhat* agree regarding the pension. But remember, those workers were part of a union that basically forced GM to provide those benefits. Perhaps THEY should have considered that their actions would make the cars the company sold less affordable and lead to a weaker company competitively.

You could take this one step further to the states those factories are in. The right-to-work states aren't facing losing so many jobs as those states that required union access.

This bailout discussion has the makings for some very interesting case studies at business schools everywhere. Someday I hope to get an MBA and may be reading all about this all over again.


On Nov 20 01:06 PM TEA wrote:

> I agree with Mitt on every point except the pension, these retirement
> programs were promises made by the board of directors and executive
> management and should have been fully funded as the promises were
> made otherwise the companies should not have made the future commitment.
> To take that back now is complete dishonesty and lies to the workforce
> years ago. I like it no different to the Social Security promises
> made by our elected officials when they move social security into
> the general fund years ago and have spent every penny and put IOU’s
> in its place. At some point the corporate leaders , board of directors
> and elected officials that made these retirement promises and decisions
> to spend the money need to be held accountable as they said back
> when the promises were made "the people we are doing this for will
> not save for retirement so we will take care of them". “Boy Did They
> Take Care of Them” And now watch your elected officials will try
> to go after your 401K’s saying you don’t know how to invest in the
> markets so the government will keep you safe. Hold on to your wallet…
> Keep in mind that millions of workers saving small amounts add up
> to very large amounts that corporate management and elected officials’
> can’t pillage fast enough all the while protecting their single very
> large estates making sure they never get touched.

2008 Nov 20 01:28 PM

[Rokjok777:]

The market knows what the future holds for GM. Their 2033 bonds are priced at 15 cents. That means the market thinks they will be around for exactly *two* interest payments and then will be gone. Looks like those two payments will be made by the US Chump, er I mean the US Taxpayer. If the Chump/Taxpayer ever woke up and wrote to their congressman, maybe even tied up the phone lines, they might get a different response. But you're probably reaching for the TV clicker, not the telephone right now. If so you get what you deserve.

2008 Nov 20 02:35 PM

[TomWilkinso...:]

Unfortunatly, a lot of Mitt's information is out of date. But hey, the Romney's did leave Michigan in 1969. Since 2000, GM has completely overhauled its product lineup, and made a major commitment to advanced technology vehicles like the upcoming Chevy Volt. We have also cut our workforce by 52%, brought our plant capacity in line with realistic demand, and closed the productivity gap with the transplants. The last major piece, labor and legacy costs, were coming under control thanks to the 2007 UAW agreement. If that's not a turnaround, I am not sure what is.

The credit crisis has hit the industry hard. Bridge loans to get the industry through this downturn are a reasonable proposition.

2008 Nov 20 04:48 PM

[working at ...:]

Mr Romney executive experience is living well of the wealth his father made building Staples. He is no more an expert than the author of this article. Stop listening to idiots and start to think for yourself.


On Nov 20 12:03 PM I. Barr wrote:

> Mitt Romney should be appointed as Czar of the bail out of the Big
> Motor Companies. As such he will control the money, replace management,
> negotiate with UAW and retirees and plan R&D and the future of
> these companies. Automobile US industry cannot be left in the hands
> of arrogant and selfish management or in the hands of UAW who milked
> the cow dry.

2008 Nov 20 10:39 PM

[DRO:]

His father had nothing to do with Staples. His father had everything to do with the auto industry and the State of Michigan. Please don't display your lack of intelligence by misstating facts and then calling Romney an "idiot." Oh, and before anyone else criticizes Romney's proposal to solve this problem, you better proffer a better idea first. Nobody wants to waste their time reading the remarks of a coward.


On Nov 20 10:39 PM Wroking at ford wrote:

> Mr Romney executive experience is living well of the wealth his father
> made building Staples. He is no more an expert than the author of
> this article. Stop listening to idiots and start to think for yourself.
>

2008 Nov 21 01:06 AM

[Ameriworker:]

Why is everybody bashing Detroit, but not mentioning or asking why we gave AIG $150 billion? How come they are not being called arrogant, and stupid.? How did they get themselves in their mess and if they are so global, why does America alone have to bail them out? How many American jobs are at stake in their problem?

The auto industry is asking for help to keep middle class paying American jobs, but it seems all Washington wants to do is bust the union, so everbody can work for Walmart type wages, the new 21st Century American standard of living.

Jan 06 08:11 PM