A Disconnect in Romney’s Plan for Reviving the Auto Industry

Former presidential hopeful Mitt Romney has an op-ed in today’s New York Times titled “Let Detroit Go Bankrupt.” His prescription for saving American automakers through Chapter 11 begins with these two steps:

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.

So far so good — overly generous union agreements are widely agreed to be at the heart of the problem, and bankruptcy would provide a mechanism for overturning those agreements.

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.

I’m still with him — I don’t know whether the current auto executives have been incompetent or, more generously, have simply been unable to play the very bad hand they were dealt. But in any event, wrenching corporate change requires new corporate leadership, almost by definition.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end.

Oops. Is it just me, or does anyone else see a bit of tension between new cram-down contracts in Step One and improved labor relations in Step Two?

Step One is clearly essential. I wouldn’t pin a whole lot of hopes on Step Two.

3 thoughts on “A Disconnect in Romney’s Plan for Reviving the Auto Industry

  1. A little off-topic here, but something that’s been on my mind lately. Since the inception of labor unions, animosity has been present. You can’t erase generations of “us versus them” mentality on either side of the equation. Protection for the worker has been shown in the past to be necessary, and frankly, I’m concerned that any attempt to end labor unions will result in a situation much like the turn of the century, when my great-grandfather couldn’t find work because he tried to unionize the railroad workers, who were expected to put in 12-hour, 6-day shifts and who worked in some mighty dangerous conditions.

    The moment the labor unions were called into question in the Reagan era, I saw an entire region turn from middle-class to poverty-level overnight. Friends who worked in coal mines and once made $25 an hour now couldn’t get work at $8 an hour in those same coal mines. And conditions became very dangerous sicne there was no union present to insist on safety measures.

    While I get completely how the prices of what we buy are affected by unions, I know full well the other side of the issue and I’ve seen up close the reasons why labor unions exist and are in many respects necessary. Given our current climate of corporate greed at the top, it’s difficult to see how an influx of unemployed in the marketplace will self-correct should unions be eliminated and companies take to hiring at lower rates. People desperate to feed families will still take the jobs for lack of any other option.

  2. Lori, certainly unions have served socially useful roles in securing safer working conditions and other matters. And I think it’s appropriate for workers to have some leverage in seeking higher wages through unions. I’m actually a former elected union official (Newspaper Guild unit at a small NJ daily).

    But I lose sympathy for unions when they, for example, enforce cumbersome work rules that are specifically designed to make a company LESS efficient, for the purpose of creating or preserving union jobs. Eventually that makes a company uncompetitive (cf: Motors, General).

  3. Absolutely true, Kirk. In fact, current economic conditions may make it much easier for companies and unions to come to agreements that further the goals of both groups, including the union not blocking technology that could eliminate some jobs.

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