Hey, is Romney saying anything really different than Obama?

Mitt Romney – who owes so much to the American auto industry, is saying in an NYT op ed piece today, don’t bail them out – until you get to the end where he seems to be saying, bail them out, but with lots of conditions. Yes, he talks about a “managed bankruptcy” – AND he talks about lots of federal protection. Which seems to me to be close what Obama is saying. In any event, I hope people will forget the source, look closely at what he’s saying, and mine it for the good ideas that may be there.

This seems to me like another situation where labels are getting in our way. Call it a “bail out” and no one’s interested. So quit the word games. Find a solution. Go for it. This is also another one of those things where the devil is in the details. Romney supplies several I find interesting:

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.


2 Responses

  1. Romney was CEO of Bain & Company and co-founder of Bain Capital, a private equity investment firm. During the 14 years Romney headed the company, Bain Capital’s average annual internal rate of return on realized investments was 113 percent, making money hand over fist through leveraged buyouts, which in shorthand meant that Romney made moneys twice: once as part of the management consulting firm recommending leveraged buyouts and then also delegating the reengineering functions to one of his other consulting businesses, which restructured operations, especially cutting employment and benefits. Consulting is easy. Consultants like lawyers give advice. They rarely are responsible for the success or failure of the advice they impart. Many companies went under, were emaciated, drained, and are now gone from the employment scene. So much for heart and soul, and pre-election Good Samaritan actions. In traditional fashion Romney demands dividends in form of pain and suffering . . . But Romney will always be known as an honorable man.

    Something has been really annoying me, namely the ease with which media journalists convey the message to the public, that workers in automobile manufacturing are paid outlandish salaries and benefits. The reality is that a small group of autoworkers’ salary scales let them benefit about 10 percent more than other US industrial workers. While that is true, it is also true that they benefit in the same proportion over most of their coworkers in the same plants. For example, and mine (I am not an economist or statistician) is just a very coarse outline of an otherwise very nuanced salary picture, which depends on location of plants within the States, each with varying salary agreements and structures, and requirements for expertise. By lumping together automotive engineers ($50.36 per hour), managers ($46.18 per hour) with assembly line workers ($17.98 per hour) the media creates an unfair picture of the worker at the assembly line as overpaid, unless the information is placed into realistic contexts, which usually are much more complex than any media’s eye or sound bite.

    What should be an appropriate reward for an assembly line worker being annually on the economy’s shooting list (since Lee Iacocca, which is nearly thirty years ago), not because US autoworkers are less efficient, less skilled and therefore overpaid? How does one appraise an industry in which the products are inferior in their conception and in design, lack popular adulation for styling or are out of touch with modern energy-saving technologies?

    When the car industry folds, the upper third will survive well, their parachutes lined with the proper material. The middle third, will have some hardships, but managers will find new positions nearly anywhere in business, especially now, that the Harvard Business School sees no difference in managing anything, with the results of former university presidents managing baseball, and rear admirals managing universities or turning up as lobbyists for all kinds of industry.

    It is the lowest third, the assembly workers that will be uprooted, sworn to corporate loyalty without reciprocity, but with all promises broken. This group will be forced to disband neighborhoods, hearth and home. If this world is just about the bottom line and not about quality of life, then what makes the US so beautiful?

  2. Thanks for the Romney background . I also really liked this:

    “Something has been really annoying me, namely the ease with which media journalists convey the message to the public, that workers in automobile manufacturing are paid outlandish salaries and benefits.”

    Yep – a little fact-checking would be helpful. It would be nice if reporters actually did some orginal work. Of course, that makes for boring reading, so it doesn’t get done.

    I think this is part of the word game problem. All – pro or con – frame the issue with a single word – bailout. It’s a loser. That word carries tremendous negative baggage and once we hear it, the brain stops, and we seem unable to focus on problems and solutions – instead we have just another Holy War.

    I also think there’s a real danger of falling into old patterns, old assumptions, old battles firmly planted in old ideologies.Someone needs to be rel clear about our goals, then talk about solutions to reach those goals.

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