Thursday, November 20, 2008

Unions are the problem with the auto industry, according to Mitt Romney

Former Massachusetts Governor and presidential hopeful Mitt Romney has written an op-ed in the New York Times about the auto industry. Gov. Romney is uniquely qualified to comment on the industry...not only due to his personal knowledge of the business but also because his father was the president of American Motors. I was expecting, then, something that was thoughtful and insightful; unfortunately, this article included the same old Republican talking points. It could have been written by Newt Gingrich or Rush Limbaugh.

In a little less than 900 words, Gov. Romney summed up the problems of the auto industry in one word...unions. Unions are the sole problem. Not once in the article did he mention anything about management. He did not mention anything about healthcare costs. The problem was simply labor costs. The former governor mentioned that American automakers spend the extra $2000 per car. Other car manufacturers like BMW, Honda or Toyota don't have to pay this expense. Unions are the root of all evil. That's Romney's argument in a nutshell.

Nowhere in Gov. Romney's article does it mention anything about CEO pay. He doesn't mention that the CEO of General Motors, G. Richard Wagoner, is getting paid about $14.4 million per year. That is not much when compared to hedge fund managers who made hundreds of millions (some times billions) of dollars per year...but when you compare that to less than $1 million per year that the CEO of Toyota takes home everything comes into focus.
Gov. Romney, like many other Republicans, argues that America does not need to bail out the auto industry. Instead, America needs to let the auto industry go bankrupt. Once they file for Chapter 11, the auto industry can renegotiate contracts and refocus on their product.

Lee Iacocca , 1979, received loan guarantees from the United States government. His Chrysler Corporation began to produce smaller, cost-efficient carsThe Dodge Aries and the Plymouth Reliant are examples.. In 1983, Chrysler introduced the minivan to the United States. Because of these innovations, Chrysler was able to pay off its loans seven years ahead of schedule. (Iococca's silence is troubling. I hope that he isn't sick. hope that he will weigh in on this subject.)
I will not pretend to know all the ins and outs of Detroit. What I will tell you is that throughout the 1980s and 1990s they pumped out a series of cars that were unreliable, expensive and guzzled gas. During this time, Toyota and Honda chipped away at their market share by delivering small, cost-efficient and reliable cars. There is no doubt that mistakes were made both by management and labor throughout this time. For too long Detroit has continued to rely on SUV and truck sales which have large profit margins. A new model needs to be developed. Detroit has to figure out a way to develop cars quicker and faster. Detroit needs to innovate. (I know everybody uses the word innovate, too much, meaning create something.) Detroit needs to develop several types of new cars. These cars should include electric cars and hydrogen cars. There should be new fuel-efficient cars. We need to be more and better hybrid cars. The reliability of American cars should be unparalleled. Detroit should not expect Americans to buy a new car every 3-4 years. Americans don't make that kind of money anymore.

The American auto industry must take risks. In the past, the auto industry was making way too much money to take any risks. They never sqw the need to do so. They were forced to embrace seatbelts, safety glass, anti-lock brakes and other innovations. In my opinion, small divisions should be set up to take risks, while they alll design and research auto safety to see if it all works.

Finally, Detroit needs to look at several problems and work with labor unions and the government to fix these problems. These problems include (but are not limited to) healthcare costs, pension costs...labor costs. If Detroit can build a car that is as good as a Mercedes, Audi or BMW...I don't mind paying the extra $1000 - $1500 more if I know the workers are being well compensated.


redante said...

Hello Dr. Thompson

The Huffington Post had a great article also in response to Roomney's op-ed. I agree with what you are saying that Romney smells blood and wants to go in for the kill on unions.

One of the commenters on the Huffington Post article hits the nail right on the head on the utter disregard for the human effects of the type of "restructuring" that people like Romney are calling for. The commenter mentions that alot of problems would be adressed at once, for example, if the US had a system of universal health care. The Big Three car companies would not have to worry about the cost of insuring workers in this case and can have prices competitive with the Japanese and Korean companies.

Labor has been the only contemporary mass movement for working people that has demonstrated effectiveness and been able to mobilize for working people' interests time and time again (despite hardly getting anything back politically from the election of Democrats). Any chance the corporate class can get to assault and weaken unions and destroy them once and for all they will. Romney's argument isn't just about economic effectiveness or profitability -- it is also an opening salvo of a sustained and continuing public relations assault on unions and other Progressive organizations.

Anonymous said...

I totally agree with Romney. The number don't lie.