"Let Detroit Go Bankrupt"

The United States is facing the most challenging economic climate in decades – the housing market is slumping, the credit market is nonexistent, and many of America’s largest businesses are suffering so much that they have asked both the American Government and Sovereign Wealth Funds for bailouts. In fact, the CEOs of General Motors, Ford, and Chrysler testified before Congress yesterday in an effort to convince U.S. Representatives to approve a $25 billion bailout of the Big Three car companies.

Yesterday morning, former Republican Presidential candidate and native Michigander Mitt Romney published an op-ed in the New York Times entitled “Let Detroit Go Bankrupt.” At a time when the American people and American businesses are looking for government handouts during a time of trouble, this op-ed is one of the few instances which paint reality instead of political correctness. Governor Romney kept his Republican nomination hopes alive by winning the Michigan Primary, so why would he make such a bold statement now against the main industry of his home state? As a private equity investor, Romney sought to build great companies and fix broken ones. The government should not write a check to postpone the demise of struggling companies – it should work to fix them, soften the current tax and fuel efficiency burdens placed upon American car companies, and invest in research so we can deliver products that customers want to buy at affordable prices.

Despite the controversial title, his piece outlines the basic faults of the American business climate – lack of innovation, short sidedness, and poor business practices – and proposes that the only way to truly get them running again is through a managed bankruptcy which would enable companies to streamline excess labor as well as pension and real estate costs.

America’s greatness has been derived by resilience in the face of adversity. American car companies need more than a facelift. “Management as is must go.” New leaders should be recruited from unrelated industries. The government should not simply write a check – there should be cross-industry collaboration. New leadership should excel in marketing, innovation, creativity and labor relations.

We also need new labor agreements. Our international counterparts are able to produce cars for lower wages and are winning market share from The Big Three. The former head of the United Automobile Workers, Walter Reuther, acknowledges that “getting more and more pay for less and less work is a dead-end street.” The U.A.W. needs to set a new course – designed around profit sharing and stock grants to employees. There can no longer be resentment between workers and management. As workers accept salary cuts, executives must also make sacrifices and get rid of planes and fancy dinners. People must agree to “sanity in salaries and perks.”

One of the biggest things holding American companies back is the focus on short-term stock price instead of long term growth. Investments must be made for the future. Management should receive bonuses for growing market share, increasing product quality and customer satisfaction in addition to standard profit measures, not quarterly stock price increases.

In the 2004 movie, Man on Fire, Christopher Walken’s character notes that “a man can be an artist at anything, food or whatever if you’re good enough at it. Creasy's art is death, and he's about to paint his masterpiece!” American car companies need help and they need it quickly. Governor Romney should swallow his pride about losing the nomination for President and take the helm of one of America’s struggling companies. Detroit needs a turnaround, not a check. It is time for America’s great turnaround artist to paint his masterpiece.