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Bankruptcy Is Not The End of U.S. Auto Industry, It the Beginning

Posted by Michael Corey on Dec 1, 2008 2:27:00 AM

Should We Bail Out the Auto Industry?


Should be bail out the Auto Industry, Should we not. Not. My friends and I go round and round on this issue. There are a lot of jobs at stake here.  I get it! ! !.  I also see a lot of companies with their hands out who don’t get it. It really bothers me that they came flying in there corporate jets to ask for the money.  When times are tough, it means we all make adjustments. We suck it up.

I have 3 people in my household attending college right now. Money is very tight.  A college education is a very expensive undertaking. To help get by we have made adjustments in the way we live. Everything from making sure we shut lights off at nice, to save on the electricity bill, to taking much more modest vacations, to making due with what we have or doing without. Showing up in Washington D.C. via the corporate jet tells me they don’t get it. They have not taken a serious look at their companies and found ways where they can cut back and cut costs.  It starts at the top and permeates all the way to the bottom. If senior management wasn’t serious about cutting back, why would else in the company be serious about it.

At times of great crisis in the United States, we have had real leaders rise to the occasion.  I hope the elected officials set there political views aside and do what is best for America.

Bankruptcy Is not the End of the U.S. Auto Industry, It is a new Beginning.

The U.S. auto industry is not competitive today. Handing over Tax Payer dollars to continue business as usual is a huge mistake. It may buy us a few years, it may save a few jobs for a while eventually it is doomed to failure as it exists and operates today.

Going into Bankruptcy is a chance for the industry to restructure itself and thrive moving forward. It’s a chance to rewrite Union contracts so the  U.S. Auto Industry can be competitive again. It’s a chance to rewrite Management packages so they make sense.  It’s a complete restructure of the business and if the stakeholders don’t work together, they all loose. Until the U.S. Auto industry has taken the time to make those changes they have no right to ask the Tax Payers to bail them out. A perfect example is the corporate jets. Perhaps it is more cost effective for a U.S. Auto maker to have a fleet of jets, on the other hand perhaps they should be sold off.  I feel Bankruptcy if the path needed to help this industry get back to long-term viable health. 

Mitt Romney was a past Governor of Massachusetts.  Mitt made a lot of money knowing what companies to invest in and what companies not to invest in. He recently posted an opinion that was picked up my the N.Y. Times. Here is a portion of that article….

Op-Ed Contributor

Let Detroit Go Bankrupt


Published: November 18, 2008

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.

To read the entire article.....

Let Detroit Go Bankrupt

Posted Michael Corey,

Founder & CEO, Ntirety






Topics: Bankruptcy, Detroit, Mitt Romney, U.S. Auto, GM, FORD, Bailout

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