The government should not bailout the American auto-industry and should choose instead to let it fall into bankruptcy where it can restructure itself to more adequately compete in the global auto market, former Gov. Mitt Romney wrote in a New York Times op-ed Wednesday.
Romney, a Belmont Republican whose father was the president of American Motors, said by letting the industry slide into bankruptcy, auto companies can address two crucial problems.
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 likeBMW, 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. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota's Avalon. Of course the Avalon feels like a better product - it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
More after the jump.
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