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Article Source: CBS News
Back in 2008 - at the height of the financial crisis - Mitt Romney wrote an op-ed for the New York Times opposing the Obama administration's plan to bail out the American auto industry. The headline put on the column: "Let Detroit Go Bankrupt."
By: Brian Montopoli
Romney argues that they not only would they have survived without the bailout - they would have been better off. His alternate course of action would have been to provide federal loan guarantees to banks that loaned Detroit the necessary money, as opposed to having the government offer the loan directly.
Romney also suggests that the Obama administration's close ties to organized labor allowed labor to get a sweetheart deal when the government provided the loan.
watch video.......
comments and opinions welcome.......
TDR
#1 - Sat Feb 18, 2012 3:47 PM ESTLast week, with GM profits report for 2011, mention in the article was made that detroit region design centers, factories and suppliers cannot find engineers.
This is a very excellent situation because it means that long delayed work efforts are being brought back to the front burners. Tooling, machinery, factory updates in electrical distribution, new welder and paint robots, plenty of budget to do it right. AND that requires engineers.
It also means our recent and future eng grads will have jobs and further the economy, society and specific products.
#2 - Sat Feb 18, 2012 4:17 PM ESTBottom line. Mitt Romney was against the bailout. The bailout worked. Without the bailout, Romney argued the auto industry would have been better off. Better off for whom? The thousands of unemployed workers? Mitt Romney has painted himself into a corner.
#3 - Sat Feb 18, 2012 4:58 PM ESTCheney / bush started the work with the 3 north american auto companies. I would suggest they would have followed the same path the white house used for the steel mill bankruptcies about 7 years ago. In that case, Youngstown federal bankruptcy court handled all the cases. Here, with 13 mills, only one survived = US steel in Gary. All the others changed hands and now have foreign ownership except Midwest steel which US steel obtained.
Had that format been followed, the three autos would have been broken up into many pieces. The former vertical business model of GM had been undergoing transition to the supplier model that Ford always practiced. bankruptcy would have driven the components to pacific rim or mexico immediately. I have packed up a plant and moved it 200 miles away in 30 days. Back up and training new workers and quality folks within a few days.
The better reputations of some models would have been retained by the new asian or european owners. Others would have disappeared. Even now, Mercury, Saturn and Pontiac are off the show room floor.
Another massive change is the relationship between the manufacturers and independent dealers. Sadly, smaller village dealers are gone and the current model is having the dealerships adjoining near an interstate / highway intersection. We pay lip service to advocating small business and then hang them out to failure - not of their own making, but rather by a distant judge allowing them to lose their families life work and source of income. So much for hard work.
This is a snapshot of the pain Detroit would have suffered. The new owners would not yet be achieving the sales and profits reported for 2011. The massive job losses would be 18 months to 2 years behind the current rate of recovery.
The US treasury will break even or make a few bucks on its GM stock, 25%, very soon.
last thought: it is also feasible that asian bidders would have simply killed off the GM, chrysler and ford models. Sometimes we buy a competitor and kill it. Example: whirlpool buying maytag.
#4 - Sat Feb 18, 2012 6:42 PM ESTDog,
please read it again. I did not blame Bush at all. I said that the autos would have followed the same method used for the steel mills. I did say the white house was involved with the autos before Obama took office. Obama did use TARP dollars to loan to two auto companies and I did not complain about that at all.
AIG has a lot more TARP dollars than I can even count. Lots of whining that they have to sell assets. So what!! Plenty of families have to sell assets or go without.
I'm still worried that all this bailout did was buy GM and Chrysler more time.
Nothing was fixed with regard to the the retirement obligations or the wage/benefit structure of current employees.
We talk about jobs saved and recent hiring now going on, but... Assembly plants were permanently shuttered due to eliminating the Pontiac, Saturn and Hummer brands. Dealerships were closed and the jobs they provided went with them. How suppliers and vendors who had money owed to them were designated as "unsecured claims" by the bankruptcy procedures? How many them went under as a result? How many are barely hanging on?
Now we have a "revitalized GM" building a 42000 dollar semi-electric car that nobody wants. I don't know about Arizona, Rattler but some GM dealers here still have 2011 models and the factory-dealer incentives being offered by GM are incrediblewhere I live...Almost to the point that you can buy new for almost the same price a three year old used model.
This whole episode has turned the industry on its ear.
#5 - Mon Feb 20, 2012 8:30 PM ESTgm does need more time - but they really had to and continue to revitalize their culture. Yes, corporations have standards of performance for all employees. There is ethics, quality, broad vision, customer focus (ford pun, please excuse), and providing a reliable safe efficient vehicle at reasonable price.
GM became arrogant, lazy, too much non productive management and they wasted 30 years - they knew it all the time, yet, never hit the reset button. Keep on keepin on, I call it.
Gm had 118 billion in their pension trust and I still do not know how it was distributed at bankruptcy.
Chrysler needs no help, not even with advertising = IMPORT DETROIT
None of the three need any boost from me. I am happy with their current path to success.
Shop floor workers DID have their hourly wages and health benefits cut - reduced a lot. And remember, not one overseas mfg from germany, japan or korea has the legacy costs Ford has. I greatly respect the family for their decision to honor all promises made. They coulda shed the pensions in bankruptcy to US pension board like United Airlines at 3 Billion dollars and so many more mere manipulators.
Had-E-Nuf,
Your analysis is spot on...one of the reason GM and Chrysler got into trouble in the first place was generous leasing programs that flooded the market with cars with residual values that did not reflect reality. They literally lost thousands of dollars per each lease turn-in sold at auction.
GM is making the same mistake again. Their cars seem to be over-priced, to keep factories humming they're being over-produced to give that election year perception that "GM's back". Many GM dealers are now stuffed to the rafters with cars that are requiring a new round of agressive incentives move them and this is going to circle back to bite them.
I wish them well, I've drove great GM vehicles my whole life and hope that I can continue to do so down the road but the future for them is uncertain. I'm just at this point glad I'm not in the car business.
bestquest
if GM had 118Billion in their pension trust, then that would have stayed in the trust. The only way that it could be broken is if there were indications that contributions to the trust were illegal. Since the pension obligations are about as high on the list that you can get, that is pretty hard to prove.
The Trust itself could have actually been padded with the shares of the New GM that are owned by the union or those shares could have divested to the union. I don't know what happened but since the pension was underfunded by GM, there is a possibility that either could have happened.
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