Of course, the New York Times can't be blamed for selecting a short, interesting title for Mitt Romney Op-Ed comments: Let Detroit Go Bankrupt has a better ring to it that "Go do a managed bankruptcy so that the companies can operate better and survive." (Or some version of the latter. Definitely not sexy!)
The best title would have been: Detroit needs a turnaround, not a check. The Op-Ed, so you can check the excerpts below, if you wish.
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ROMNEY WAS, IN FACT, ONE OF DETROIT'S STRONGEST SUPPORTERS FOR THE FUTURE!
If people in the auto industry read Romney's Op-Ed, they would see that he did not say to let it go out of business but that he said the opposite. And he even allowed for government guarantees but only if the companies restructured to be a good safe economic loan from the taxpayers.
People don't seem to have read the actual recommendations and they misunderstand the idea of bankruptcy.
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Quoting from the op-ed:
ROMNEY'S KEY POIINTS
1. " If the federal government rescues the firms without having them go through managed bankruptcy REORGANIZATION, those firms are going to be doomed." (Kind of a version of "Insanity is keeping on doing the same thing but expecting different results!")
"With [the rescue], the automakers will stay the course — the suicidal course of declining market shares,
insurmountable labor and retiree burdens [reduced in the bankruptcy], technology atrophy, product
inferiority and never-ending job losses. Detroit needs a turnaround, not a check."
2. "Without the rescue, Detroit will need to drastically RESTRUCTURE itself." (Which is what GM did, in the managed bankruptcy led by the government.)
3. Romney watched his father rescue the "given up for dead" American Motors.
"From the lessons of that turnaround, and from my own experiences, I have several prescriptions for
Detroit’s automakers."
And about investors:
"But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost."
THE PRESCRIPTIONS
"First, their huge disadvantage in costs relative to foreign brands must be eliminated."
"That means new labor agreements to align pay and benefits to match those of workers at
competitors like BMW, Honda, Nissan and Toyota." [This was done in the managed bankruptcy.]
"Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers
is not higher than that of foreign producers. [This also was done in the managed bankruptcy.]
"Second, management as is must go".
"The new management must work with labor leaders to see that the enmity between labor and
management comes to an end."
"Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th."
"Investments must be made for the future."
"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."
Must have a good sales force.
"Don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t
meet."
"It is not wrong to ask for government help, but the automakers should come up with a win-win proposition."
"I believe 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."
But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.
THE TRUTH IS...
He supported saving Detroit, for the long term and for the benefit of the nation - and doing whatever it took in terms of government guarantees, but only if the companies did the restructuring needed to be profitable (so that the taxpayers wouldn't be stuck on some uneconomic bet).
