“Let Detroit Go Bankrupt”—that’s the headline of an op-ed piece in the New York Times yesterday, written by Mitt Romney.
Romney is a former Massachusetts governor and Republican contender for the presidential nomination this year. He’s also a native son of Detroit; and his father led the turnaround of American Motors decades ago. (Read the entire Times piece here, although you might have to register on the Times site if you haven’t visited it before.)
Because, Romney says, an emergency bailout will only forestall the inevitable demise of the auto industry. It won’t change the game. Only the bitter medicine of bankruptcy will force change. In his words:
“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.”
His prescription includes new labor agreements that will reduce pay and benefits for workers, cutting executive pay and perks, cutting retiree benefits, and replacing current management with people “from companies widely respected for excellence in marketing, innovation, creativity and labor relations.” He also prescribes: Stop fighting between labor and management. Invest for the long-term. Stop the focus on quarterly earnings. Invest in innovation, in research and development. And so on.
There’s nothing new here. We’ve heard this prescription before.
The real question is this: Would bankruptcy make it happen? Or, would the cure of bankruptcy prove to be worse than the disease itself?
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