Mitt didn’t say that

Ohio Governor Ted Strickland yesterday:

“Mitt Romney proudly wrote an op-ed entitled Let Detroit Go Bankrupt. If he had had his way, devastation would have cascaded from Michigan to Ohio and across the nation.”

One of the things you learn in law school is how to lie and get away with it parse words carefully. The previous two sentences by Governor Strickland contain a factual assertion and an opinion. The factual assertion is technically true but nonetheless misleading. Mitt Romney did write that op-ed, but he didn’t put the title on it, the New York Times editors did that.

As for the accuracy of the opinion expressed by Strickland, decide for yourself. Here is the editorial that Mitt Romney wrote, just as it was originally published on November 18, 2008:

Let Detroit Go Bankrupt

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.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. 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. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

That doesn’t sound like somebody who wants to destroy an industry. And let’s remember, at the time he wrote that Mitt was just a private citizen with no dog in the fight.

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52 Responses to Mitt didn’t say that

  1. Oswald says:

    Imagine if McDonalds had to pay their employees two or three times more than any other fast-food chain. They are already geared for maximum efficiency so the only option would be to pass those increased costs on to their customers. Suddenly the price of Big Macs and Happy Meals would double while their competitors’ prices would remain unchanged.

    How much business would they lose? How many of their restaurants would be forced to close?

    • DM says:

      I like businesses to succeed, but I see faulty logic with your thinking. First, McDonald’s profit would decline, making its stock not the amazing investment it has been. So the 1%-ers would take a hit. The second thing that I could counter with, yes, the McDonald products would be higher, but the workers would have a better living standard and would spend more money at other businesses. And to play devil’s advocate, taking your logic to an extreme, McDonald’s products would be cheaper if we had slavery instead of a paid workforce.

      Wall Street wanted Costco to lower its labor cost, thereby improving the profit line. But the managers of Costco said that they wanted a happy workers because in the end, the business benefited by the happy workforce.

      • myiq2xu says:

        Taking your logic to an extreme, let’s raise the minimum wage to $50 hour. Lots of happy workers making lots more money.

        • DM says:

          Pay for labor is always competitive. I never said that people should get paid more than that. Paying $50 for labor that’s worth lots less would be very damaging too. All I did was highlight that Oswald’s logic was faulty.

        • DeniseVB says:

          This could be doable if there was a mandated profit-sharing in place 🙂

          I think Starbucks has something like this in place. Instead of $50/hour, employees earn shares in the company. Now that’s a share the wealth I could get behind.

      • jeffhas says:

        The real problem with our society (vis-a-vis jobs) happened when companies moved from Pensions to 401K’s.

        Suddenly TRILLIONS of little people’s $$$ moved into the Private Sector investors, and the call on Listed Corporations for quarterly success grew louder. These corporations have a very difficult time planning for the long term when they are judged on the short term…

        Even Steve Jobs, if he had 3-4 bad quarters, would be under pressure to leave if not shoved out before then…. it’s crazy, and it has completely changed our society, how these company’s employ people, their benefits, etc.

        This is what needs to change in the Bankster class; looking for the long game…. if you change the rules so Banksters can make more money on long term investments, Corporations will plan better for the long term.


        • myiq2xu says:

          When companies had private pensions what do you think they did with the money?

          They invested it.

        • jeffhas says:

          Pensions had boards… Bankers were playing with other investors money.

        • jeffhas says:

          Let me fix that:

          Bankers were playing with other bankers money.

        • DM says:

          You make a very good point, but I think it’s just one factor. Germany is the biggest economy in Europe. Its economy is driven by exports. A good product will demand a higher price. Too often, American companies produce shoddy products that are expensive for what they offer, imo.

          My car is made in Europe and I would buy another of the same brand again.

      • wmcb says:

        Why on earth would you think that it’s only 1%ers who take a hit when McDonalds stock goes down? That’s a very common fallacy.

        A hell,of a lot of 401ks and pension plans own Mickey D’s stock. This idea of “if wallstreet takes a hit, it’s no skin off anyone’s nose but those fatcats” is utter BULLSHIT. It’s simply not true. At all. The VAST majority of stock is owned by the middle class, not the rich.

    • gxm17 says:

      What I would like to see is a comparison of what the American executives make, including bonus packages against the foreign competition. IIRC, the difference is staggering. Perhaps it’s evened out since last it made the news. But IMO it’s not just the workers who need to take a pay cut.

      • gram cracker says:

        To make a fair comparison you have to understand what all the perks are worth. Many foreign company executives receive free limos, housing and household help the value of which does not show up in their total compensation.

        • gxm17 says:

          Sorry, but I’m not buying that American execs don’t get perks. Even the lowly VPs at the company my mother worked were driven around in limos. The amount of money and bonuses that execs make is outrageous, much more so IMO, than the living wages and benefits of the ever-dwindling union worker.

          I can’t for the life of me figure out why self-described left-leaning people would blame workers’ salaries and benefits for the demise of American industry and not the asshats who run the companies into the ground and then walk away with golden parachutes.

  2. angienc says:

    Seems the same amount of people actually read this Op-Ed as read Obama’s bios.

    • DM says:

      In 2000 we elected a drunk who drove the economy car into a ditch, and then the voters went for the choom car passenger who leads from behind.

  3. DM says:

    Mitt’s letter shows a man who understands that success cannot be handed down to businesses. Most businesses fail because they don’t adapt or they stop innovating. Sony, Rim, Sears, Sprint, etc. etc. The list is long if I were to list the current businesses that are in trouble because someone else came up with a competing product, like Apple’s iPhone or the environment changed. I agree with most of Mitt’s letter, but I don’t agree that U.S. car manufacturers lost their edge due to higher cost. If that was true, GM could have built cars in in Germany and be as successful as German manufacturers in Europe. Japanese cars were not just cheaper, they were better. There are many cheap cars that didn’t make it in the U.S. The iPhone is not cheap, but people want it and Apple is a success story.

    • Yeah, but the iPhone is only awesome because enough bells and whistles could be added due to the innovation of cheap, renewable batteries. Without that one little thing, iPhones wouldn’t exist as they do now. The energy source matters. Maybe if the renewable battery could be cheaply adapted to cars, Detroit could get off the ground with their plug-in cars.

      • gxm17 says:

        My son, the auto tech says no, and I agree with him. IMO, the car of the future will be something completely different not, as my son calls them, glorified golf carts.

      • DM says:

        I gave the iPhone as an example of how a product, that’s expensive, has decimated cheaper products. Nokia and Rim, two company stocks that Wall Street loved a few years back, but today they are struggling to survive. The market is dynamic and no company can rest on its laurels for too long. Sears became a powerhouse because it used the U.S.P.S. with its mail catalog. Now its close to bankruptcy and Amazon is the new mail order place to go.

        I was simply trying to make the point that though I agree with Romney’s letter, I disagreed that it was cost that drove GM into the ditch. Btw, Ford never took a dime from the government, but it has a great future, imo. If what Romney says is true, Ford would have needed a bailout. And I’m not saying that Ford didn’t struggle too, but its CEO, Mulally that also brought Boing back to life, was the difference.

  4. DM says:

    Success can’t be handed down, not to businesses or to individuals.

  5. This is where Mitt proves he’s a moderate. He looks at the solution as both a sacrifice of labor & executives. Not saying that I agree with everything he says, but he does not portray a person whose foremost thought is screw the little person so the greedy can get more pay-offs (wish he had mentioned naming rights). Not to mention his remarks about alternative energy needs.

    “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.”

    • DM says:

      I agree. I think Mitt will look for solutions to get the economy going and would not be afraid to admit that if the first solution doesn’t work out, he’ll will go for another solution.

  6. HELENK says:

    I remember reading articles in the 1970s about how if you drove by a employee parking lot of an American auto maker you would see more foreign made cars than American made.
    My brother worked for Ford from before the WW2 until the 70s and he was complaining about the quality going down, But he never bought any other car then a Ford.

    If a business does not keep up with technolgy and new quality ideas it can not compete. Good management will keep a company growing and surviving taking the best of the old ideas and combining the best of the new ideas is not a bad thing

    • Plants now have rules that will not allow employees to park foreign cars in their lots Their labor unions won’t either. I have family members who work for Ford. Their union is on a prominent road in Louisville KY and the ban on foreign autos is a big ass sign that sits right on the parking lot.

    • DM says:

      Many products made in the U.S.A. had a significant decline in workmanship. That’s not true of German manufactured goods. Btw, German workers get paid very well too. It’s simplistic to fault labor cost for what’s wrong with U.S.A. manufacturing problems. Personally I think after WW2 there were shifts that created many of the problems we see today. Let’s say that the chickens have come home to roost.

      • 49erDweet says:

        Simplistic premises miss the point. The historic differences in German and US manufacturing were not in manufacturers, but in labor unions. US unions have always been short-term gains driven – go for more money with less production – while German guilds have gone for the big picture, ie: the belief that quality products would build customer loyalty which would mean career job security for its members. US car manufacturers – just as the Japanese have discovered – would go broke trying to emulate the German style of production because US unionized laborers were content to sit back and kill the golden-egg laying goose, instead of cleaning out their union leadership deadwood when they had the chance. Greed over integrity. The UAW deserves all the grief it gets.

    • Jadzia says:

      I remember living in the 1970s and seeing foreign cars with their tires slashed. Of course, we were living in Upper Michigan (and later near Minnesota’s Iron Range) back then.

  7. propertius says:

    It isn’t *pay* that’s the issue. US auto manufacturers don’t pay higher wages than their Japanese and German competitors. The average wage for a unionized auto worker in the US is about $29/hour. In Japan, the average wage for an auto worker at the major manufacturers is about $28/hour. In Germany, it’s $40/hr. Medical insurance costs in both German and Japan are substantially lower than in the US. Germany has single-payer, which completely eliminates insurance costs to the employer. Japan has a mixed public/private insurance scheme, but medical costs are regulated by the government and are approximately 1/3 of the costs in the US overall.

    • wmcb says:

      The unions don’t give a shit, they just want their piece of the pie. Unions are top heavy with organizers and administrators whose focus is to keep the gravy train rolling for the union itself. Many of the plants in SC and TX and other places that they rail against pay on average as much or even MORE than union plants. Trumka and the rest don’t care, because that’s a pie that THEY don’t get a piece of.

    • Jadzia says:

      And that is actually why Mitt’s point about benefits kind of fell flat with me. If medical care works similarly in Germany as it does in France, the manufacturers still DO end up footing at least part of the bill, through “social charges”(*) assessed for each employee. (Think of it as the equivalent of having your SS and Medicare and unemployment tax taken out of your paycheck, keeping in mind that in the US there is an employer contribution to SS as well.) So the money goes to the social charges and not to, say, Aetna or Blue Cross — but it’s going out the door nonetheless. I do not know how the comparison would work with Japan, though; the numbers probably are pretty different.

      (*)Here in France, and I suspect in most Western European countries, the social charges that the employer pays amount to about 40%, which is additional to the employee’s salary. It pays for things like medical care (universal), pension benefits (universal), child benefits (universal), housing benefits (which are much more widespread here), and so on. There is an employee contribution as well but it is lower.

    • soupcity says:

      Wow, he’s a little defensive, isn’t he? Sheesh. Simple question, Dick, try answering it.

    • angienc says:

      It is very interesting that Durbin automatically defaults to accusing Bret Baier of “drawing conclusions” about the platform changes when he merely *asked* what the changes meant (i.e., clearly *wasn’t* drawing any conclusions & was, in fact, giving Durbin a chance to *explain* the reason for the changes). Protesting too much, methinks.

      Also like how Durbin dismisses the entire platform as being completely irrelevant & “never being read” when the GOP platform was a BIG FUCKING DEAL last week for containing the same pro-life language it has for the last 20 years. Is it too much to ask for some basic intellectual consistency? (Rhetorical question).

      • wmcb says:

        It’s different when we do it. R pandering is proof positive of absolute concrete vehement goals. Our pandering is just politics, no big deal.

    • leslie says:

      I wonder how it is that Durbin finally learned how to filibuster during the convention but didn’t open his mouth at any time when a filibuster could have helped to “get things done” in the Senate.

  8. DM says:

    I expect Romney will start taking the lead as voters who didn’t want to commit start to make the move away from undecided. And once that happens, many voters who are holding their nose to vote for Obama will switch to Romney. Without FL and OH, Obama can’t win.

    Romney Grabs Lead in Ohio Poll
    A new Gravis Marketing poll in Ohio shows Mitt Romney with a small lead over President Obama in the key battleground state, 47% to 44%.

    Obama held a one point lead in the firm’s previous poll.

    • gxm17 says:

      I expect you may be right. Things are starting to tip. And they look to be tipping in Romney’s favor.

    • leslie says:

      This is one of those times I wished i lived in a swing state. Unless, of course, the downstate voters in Illinois finally rise up and vote “their” party in a united way. Then even my vote might make a difference.

  9. tommy says:

    Geez Ted, I know you. And we both know that you suck at this extreme partisan bullshit. You’ve told me so yourself. Friends, Teds a good guy. Hes behaving out of character, thats all.

    • gram cracker says:

      I remember Strickland standing behind Hillary at Cincinnati State when she was shaking some papers and saying Barack Obama shame on you.

      That’s what swallowing the kool-aid will do to you. Guess Clinton is backstage right now getting his dose for tonight.

  10. gram cracker says:

    What Mitt wrote really rang a bell with me. I spent 30+ years in R&D. About half of that time was spent in manufacturing plants all across this country – from Boston to Long Beach. All of the plants I worked at are now closed. The Chicago site is now a Home Depot.

    Many factors have contributed to the decline of manufacturing in the USA including organized labor wage/job protectionist demands, EPA interpretation/enforcement of Clean Air/Water Act, aging facilities, protectionist foreign government practices and less domestic demand. For many multinational companies their biggest growth potential is going to be in Asia not in the USA.

    A neighbor who worked in a now closed Batavia, OH Ford transmission plant told me how disgusted he was when he saw the union protect a worker from being fired or even reprimanded for egregious behavior such as being so stoned that she passed out and caused the production line to stop.

    This unskilled person was paid $33/hr to sit on a stool and push a button. Those high pay/unskilled manufacturing jobs right out of high school are gone the way of the dodo bird and aren’t likely to ever return.

    If unions succeed in getting health care workers all unionized under Obamacare I fear for the quality of health care and cost.

    • DM says:

      I totally agree that labor unions are responsible for their own demise and are contributors to the ills that plague U.S. manufacturing. As you point out, it’s just one of the factors.

    • gxm17 says:

      My husband is a manager in a union environment. Needless to say, he hates dealing with them, and he is no longer the union-loving guy I meet so many moons ago. But his big complaint isn’t about salaries or benefits. His big complaint is about how hard it is to discipline or fire bad employees or malingerers who are playing the system. The thing of it is: these bad apples are only a small percent of his work force. They don’t represent all workers, and I think that’s something to keep in mind. It seems to me that people have this skewed view of the union worker. They’re not (all) mastermind extortionists and stick-up artists. Mostly, they’re just regular folks trying to put food on the table and a roof over their family’s head.

      I agree that the person so stoned they caused the production line to stop should be fired. But that’s not a salaries and benefits issue. That’s a disciplinary issue. And I agree that unions impede management’s ability to deal effectively with a problem employee. But I don’t see why that should be used as a denouncement of all union workers.

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