Mitt Romney: Let Detroit Go Bankrupt
That’s what the would-be president says in Wednesday’s New York Times. He says a bailout would guarantee the demise of the auto industry.
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.
Romney, whose father once ran American Motors, says retiree benefits must be reduced and other labor agreements changed because of the $2,000 per car those agreements cost, which make American cars unable to compete with those made overseas. And current management has to go, too. and management salaries need to be cut.
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.Click here for reuse options!
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