
Let Detroit Go Bankrupt - chaostheory
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2&rss
======
fallentimes
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
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.

~~~
crabapple
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

~~~
yummyfajitas
A big 3 bankruptcy will be bad for auto workers, since the bankruptcy judge
will rewrite their contracts. Since they currently get way above market rate,
the judge will probably give them a pay cut, and authorize the layoff of many
(1).

Take a look at which politicians support the bailout. Then take a look at
which politicians get UAW money:

<http://www.opensecrets.org/orgs/summary.php?id=D000000070>

Coincidence?

(1) Due to union contracts, the big3 are unable to lay off workers as a normal
company would do.

~~~
crabapple
_A big 3 bankruptcy will be bad for auto workers_

yes, i think that is understood. they're going to live in the real world one
way or another

get them out of the big 3 and they can find work that the economy values. will
they find it soon? no, but then again maybe trying to compete in the global
economy with a high school education wasn't such a bright idea after all

this is just about a huge chunk of our economy that has been living in the 70s
finally forced to join the rest of us

------
jimbokun
"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.

~~~
chris11
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.

~~~
Tichy
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.

~~~
chris11
I think its more than a symbol. They would probably still get a lot money, but
at least it would be mainly based on stock price/performance.

------
fauigerzigerk
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.

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

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

~~~
terpua
A great pitch to become the new car czar.

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

~~~
hugh
But they won against the Czars.

~~~
gamache
Did they? How would you describe Putin?

------
chris11
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.

------
davidw
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).

~~~
fallentimes
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?

------
nazgulnarsil
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.

------
hooande
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.

------
mattmaroon
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.

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

------
ensignavenger
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!

------
Tritis
<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?

~~~
Dilpil
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.

------
netcan
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.

------
nradov
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...](http://finance.yahoo.com/q/hp?s=GM&a=04&b=14&c=2008&d=10&e=21&f=2008&g=v)

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

------
mannylee1
This coming from the NY Times... They better take a look in the mirror.

~~~
teaquaffer
I don't follow- what do you mean?

~~~
patio11
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.)

~~~
crabapple
the nytimes isn't asking the government to deliver their papers.

~~~
fallentimes
I think a more likely result is the dissolving of their print publication or
converting to a once per week format. Could you imagine telling someone this
fifteen years ago? Crazy.

------
sh1mmer
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.

------
bpyne
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
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>

~~~
bpyne
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.

------
byrneseyeview
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.

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

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

------
Locke
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.

~~~
crabapple
_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._

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.

~~~
Locke
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.

~~~
Tichy
They build cars nobody wants anymore, credit or no credit.

~~~
antidaily
GM is still #2 in sales worldwide.

~~~
Tichy
Then why do they have a problem?

~~~
antidaily
Financial wing GMAC got killed by subprime, the credit crunch, gas prices...
all that on top of lagging sales. Sure, some of that perfect storm is their
own fault. But, it's not as simple as "their cars suck" and "the workers make
too much money".

~~~
thwarted
If everyone pays for the things that are not their own fault, then the playing
field is leveled. Then the things that are their own fault come into play, and
those parties who were hit by the common problems AND their own problems will
suffer more than those who didn't have their own problems (or had smaller self
inflicted problems). Seems this is the way it should be.

------
antidaily
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.

~~~
fallentimes
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....](http://www.detnews.com/2005/autosinsider/0510/17/A01-351179.htm)

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

~~~
chaostheory
smart businesses (especially small ones) change and adapt. if not they fail.
why subsidize bad practices and decisions?

~~~
lutorm
The aim of government is not to support businesses but to support the
citizenry. The relevant question is not whether _businesses_ will be better
off, it's whether _people_ will be better off.

------
lallysingh
Can we just buy Honda out and give them GM?

------
chris11
They just canceled the bailout vote, so it looks like Bush will make the
decision now.

------
froo
This seems like some common sense...

cant they just get some magic beans instead?

------
crabapple
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

~~~
mchristoff
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?

~~~
blurry
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.

~~~
mchristoff
woah woah woah! i appreciate your zeal and your need to direct your anger
somewhere, but your sending it the wrong way buddy. my original comment was
not meant to express how hard mine or my family's life is/was, it was to clear
up statements like this:

"union workers at gm who make 8x the wages, do less work"

It's simply not true, and it does disgust me that we feel the need to degrade
a whole class of people to make the point that the system is fucked up. i'll
be the first one to say that all of us who live in the country are extremely
lucky and this goes often quite unappreciated. maybe not my father, but both
my grandfathers have similar story's to your own. i thank god everyday for the
opportunity afforded to me and my family.

"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."

listen man, i'm not getting into a pissing contest with you. your taking
little tidbits of my words and making them into the story that you want. you
don't know my story nor my families.

the point of my original comment was that for the most part auto-workers are
honest, working people like the rest of us. there's plenty of room for
rational argument on what should happen to the auto industry, i just can't
agree with the constant barrage of comments insinuating that people like my
father are lazy, unappreciative, and somehow got what's coming to them for
just doing what anyone of us would do in their situation.

~~~
blurry
How am I taking tidbits of your words and making them into a story that I
want? I simply called you out on exactly what you said, both your facts and
your angry, self-righteous tone.

 _You_ said your father has put you through college and has retired after 25
years. Presuming he started working at 25, we have him retiring at what, 50?
Who pays for their kids' college and retires at 50? Investment bankers and
plastic surgeons, that's who. The rest of the country works well into old age
(most without adequate health insurance) and has their kids taking on student
loans.

 _You_ opened your comment with anger, talking about your disgust, accusing
crabapple of over-generalization and ignorance, and essentially dismissing
_all of us_ as moneybags who use hypothetical Denny's waitresses to degrade
your family or ignore your hardship. (Read: shut up and fork over the money -
or, pardon me, you stated that you are as of yet undecided whether it would
benefit your family, so I guess we'll just sit tight and wait for your
decision.)

You accuse me of zeal and psycho-analyze my anger but I am just reacting to
the broad-daylight robbery that is taking place. People like you think that if
they make a lot of noise and talk about their dads working their asses of for
x number of years, we'll all get misty eyed and just hand over our money.

You are now getting a dose of your own medicine. I take your dad's 2-hour
commute and raise you mine's World War II. Ridiculous, isn't it. When auto
workers and their families stop blanketing the internet with their sob
stories, we'll stop commenting on them. Over.

~~~
mchristoff
no where did i say my dad only worked 25 years. i said he worked for gm over
25 years. does this mean it was his first job, no? as for student loans, i
certainly do have them. it's unfortunate that in this country simply getting
student loans will not pay for a four year school. again, i believe i said
"benefit my country or my family". do i have to go on? seriously, this is the
classic case of reading what you want to read to form the picture to fit your
preconceived notions.

sure, "you raise me" wwII. wtf? i'm sorry for what your dad went through, but
so did my grandparents who were born in eastern europe and escaped to america.
i just don't get this idea that you can't feel any compassion if someone
didn't escape genocide. there's a lot more complexity to people's stories than
you may realize.

my simple point is not that you should cry for any autoworker or even give
them a dime. i'm just sick of hearing statement like crabapple's which
completely exaggerate the facts.

* 8x wages - no * no deductable healthcare - not for 10 years * work less - by my personal experience, no

it comes from this characature of what the reality is. the fact is AMERICANS
ARE PRIVILEGED. i get it. i'm not asking anyone to cry for my family. what i
am saying is that chances are most auto workers are hard working people like
the rest of us. i know my father didn't escape ethnic conflict in europe in
wwII, but he certainly did the best of his ability to provide for his family.
i'm not saying that deserves your money, but i am saying that it doesn't
deserve to be belittled.

~~~
mchristoff
hmmm... you know i just wrote this, and i'm realizing i'm just falling into
this trap needless argument. looking back at my thread i think i approached
crabapple's initial comment with way too much zeal myself. the thing that
irked me the most about crabapple's comment was not the point (ie agreeing
with mit romney's position), but the way in which he/she went about making it.
by perpetuating this characature of the "uaw king", i feel like it belittles
honest, working americans like my father. i realize that my father was lucky
for being born in america after wwII, but he did the best he could with the
hand he was dealt and my pride certainly show through.

------
LPTS
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
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.

------
flavio87
He's right.

------
joubert
They make shitty cars anyway.

