The Big Three - Let Them Go Bankrupt

The Big Three, Ford, GM, and Chrysler; proud American institutions, all. I say, let them go bankrupt. These companies are failing for a reason, mainly, they are hemorrhaging money. They pay ridiculous wages, almost double that of foreign automakers that build cars in America, like Toyota. They have absurd pensions, and health care plans. In addition to that, their product, of late, has been inferior to foreign cars. Why is a Honda Civic the most stolen car? Because it runs amazingly well, with little maitanence, and it gets amazing gas mileage; who would want to steal a Ford Focus?

If we bail these companies out, they will have no insentive to change, and will continue down the failing paths that have brought them here, leading to an inevitable collapse, and perhaps billions more in future bailout attempts. I say shoot the dog in the head, and put it out of it’s misery. If these companies go bankrupt, they will be forced to completely restructure themselves, and put themselves on a track that will lead to company growth, increased sales, and a larger market share.

How should they restructure themselves? Well, Mitt Romney has some suggestions:

“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.”

“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.”

“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.”

For a more detailed analysis, read Mitt Romney’s article in the NY Times.