Cadillac Owners Forum banner

1 - 20 of 67 Posts

·
Cadillac Maniac
Cadillac Escalade
Joined
·
13,754 Posts
Discussion Starter #1
Let Detroit Go Bankrupt

By MITT ROMNEY
November 19, 2008
Boston

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

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. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

Full article here:
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=3
 

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
Says the millionaire. :rolleyes:

Easy advice to give when you won't be the one losing your job or paycheck AND won't be affected by the ensuing financial crisis.
 

·
Cadillac Maniac
Cadillac Escalade
Joined
·
13,754 Posts
Discussion Starter #6
Says the millionaire. :rolleyes:

Easy advice to give when you won't be the one losing your job or paycheck AND won't be affected by the ensuing financial crisis.
Why would you or most other employees lose their jobs? They HAVE to make sales, don't they? How are they going to do that without sales people and sales managers? You're not selling Hondas...
 

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
Lord Cadillac said:
Why would you or most other employees lose their jobs? They HAVE to make sales, don't they? How are they going to do that without sales people and sales managers? You're not selling Hondas...
Who do you think buys cars? People with money, confidence in the economy and jobs, that's who. It's not a simple case of saying "Well, no one's buying GM cars anymore, so I'll head over to Toyota where they're selling 500 cars a month". Why do you think Toyota and Nissan are offering 0% now? Because they see the same dire sales results that GM's been seing for years. Everyone is hurting because of the economy right now.This financial crisis is already ruining sales of EVERYTHING (not just American cars), and a further collapse brought on by the failure of the Big 3 would decimate retail across the country.

Don't get me wrong- I think a lot of his ideas are good ones, but the first step of "letting them go bankrupt" is a coffin nail for the American Auto industry. The public has largely ignored GM's improvements in quality and price over the last 8 years, and I believe that regardless of what shuffling or reorganizing they do at the Upper Management level, people will avoid American cars like the Black Plague once they declare bankruptcy.

If you think GM's situation is dire now, slap the scarlet B on their chest and watch people run. The drop in quality through the 80's and 90's proved that people have a long memory for bad things, and are still holding a grudge 20 years later. No matter what they do after a Chapter 11 or 7, it'll be twenty years until buyers start to come back to the domestics, by which point they'll be a pissant competitor to the now giant Japanese companies.
 

·
Cadillac Maniac
Cadillac Escalade
Joined
·
13,754 Posts
Discussion Starter #8
I think there's another side to this story.. Consider how the public will feel about an entirely renewed GM with new upper level management and more capability to earn more revenue on each vehicle sold - which would mean better vehicles. In the end, it's probably more about what the media says about GM than what people think themselves.. If GM were to go bankrupt, unless the media wants America to go down the tubes, I'm sure they'll put a very positive light on things to the best of their abilities...

If you think GM's situation is dire now, slap the scarlet B on their chest and watch people run. The drop in quality through the 80's and 90's proved that people have a long memory for bad things, and are still holding a grudge 20 years later. No matter what they do after a Chapter 11 or 7, it'll be twenty years until buyers start to come back to the domestics, by which point they'll be a pissant competitor to the now giant Japanese companies.
 

·
Registered
ZIP
Joined
·
51,864 Posts
Mitt was saying he wants to give out loans, but the current system needs to go with its unions and retirees. And I agree that needs to change.

Think of how much more palatable it would've been if GM let the unions walk and shut down production at the last negotiations. They'd be better off now...
 

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
Barry Goldwater's book Conscience of a Conservative is some great reading about how modern unions have concentrated immense political and financial power in the hands of a few men. I'm as anti-union as they get (when it comes to the current state of unions), and was a vocal part of the people suggesting that GM tell the Unions to screw themselves during the last negotiations.

The goals Mitt describes can be achieved without Chapter 11. Change the Management, dissolve the unions and restructure the company, but don't doom it to failure by attaching the stigma of a BK.
 

·
Cadillac Maniac
Cadillac Escalade
Joined
·
13,754 Posts
Discussion Starter #12
GM needs to tell the UAW, "THIS is what we need to make on the sale of every vehicle... YOU get the rest"... "THIS" needs to be what the other auto manufacturers make. Otherwise, they might as well just close-up shop and restart as a new company.
 

·
Cadillac Maniac
Cadillac Escalade
Joined
·
13,754 Posts
Discussion Starter #13
Which is more likely to happen? Bankruptcy? Or whatever you're describing here?

Is it not possible for a large company to come out of a bankruptcy successfully?

The goals Mitt describes can be achieved without Chapter 11. Change the Management, dissolve the unions and restructure the company, but don't doom it to failure by attaching the stigma of a BK.
 

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
Large companies need DIP financing (google it) to survive restructuring during a BK. Experts agree that it won't be there due to the current economic climate, meaning that Ch.11 will ultimately result in the end of GM.

I agree with you on the Unions. Give them two choices: Make wages and benefits comparable to what the competitors' employees do, or have GM close shop and be out of a job. Not a hard choice. I suggested this same thing in our discussions here during the last UAW strike. There's plenty of qualified laborers out there that would gladly take a job at the wages Toyota pays, but Gettlefinger's Soprano-esque terms for the UAW ensure that the Detroit 3 are forced to operate at the end of a gun barrel, paying nearly twice the average yet getting less out of their workers.

If I were Mulally or Wagoner, I'd call an emergency meeting of the UAW leaders and lay it all out- either take the pay cut or there won't be a company to extort any more out of.
 

·
Watching the Watchers
Joined
·
5,959 Posts

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
I haven't read the article you linked to, nor am I in favor of a bailout.
 

·
Watching the Watchers
Joined
·
5,959 Posts
Well since hardly anyone knows about DIP financing I would assume your information came from somebody who read the article.
 

·
Super Moderator
White Diamond '03 DHS (with DTS floor shift)
Joined
·
87,284 Posts
The goals Mitt describes can be achieved without Chapter 11. Change the Management, dissolve the unions and restructure the company, but don't doom it to failure by attaching the stigma of a BK.
You cannot just "dissolve the unions". Labor laws don't allow for that. Even Chapter 11 won't do that.
 

·
See you in the funny papers
04 CTS-V, 05 STS, 07 SRX- All sold :(
Joined
·
26,239 Posts
I was speaking hypothetically. I know you can't just "dissolve" them, but there comes a time when a serious shakeup of SOP is needed.
 
1 - 20 of 67 Posts
Top