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Monday, June 13, 2011

Mitt Romney's Job Killing Record: "Let Detroit Go Bankrupt!!"

Romney's jobs record to be scrutinized in race

Republican heavyweight Mitt Romney, in a second bid for the White House, is promoting his private-sector business experience to show he could do better than President Barack Obama in creating jobs.

But opponents will find fault in his record as a corporate raider in the 1980s and as Massachusetts governor when his performance on employment was mixed at best.

Romney stressed his experience as head of private equity firm Bain Capital when he announced on Monday he was forming an exploratory committee on seeking the Republican 2012 nomination to challenge Obama, a Democrat.

He made a fortune wheeling and dealing in companies, some of which endured big job cuts as part of restructuring. Some ultimately went bankrupt.

"He was a corporate raider who often made companies profitable, not by helping them perform better -- but by simply laying off employees and killing jobs," said Ray Buckley, Democratic Party chairman of New Hampshire.

Bain Capital, which Romney headed for more than a decade, specialized in leveraged buyouts: buying companies with money borrowed against their assets, grooming them to be sold off, and in the interim collecting huge management fees.

Later, as Massachusetts governor from January 2003 to January 2007, Romney presided over one of the puniest rates of employment growth among the 50 U.S. states, at a time the nation's economy was booming.

Labor Department figures showed Massachusetts ranked 47th among the states in the rate of jobs growth in those four years -- ahead of only Ohio, Michigan and Louisiana.

The Democratic party will attempt to pick holes in Romney's jobs record if he wins the Republican nomination, a party strategist said. Romney is an early front-runner to win the nomination and some polls even show him ahead of Obama in states such as Florida, Georgia and New Hampshire. He has high name recognition and a powerful fund-raising machine.


Romney announced his first formal step for a presidential run on Monday in a short video shot at the University of New Hampshire, in which he drew a line between himself and Obama, criticizing the president for surrounding himself with people who "have never worked in the real economy."

That could be a persuasive argument at a time the world's largest economy is not growing quickly enough to make a sizable dent in the jobless rate, still at 8.8 percent, after a recession that ended in 2009.

To bolster his image as a job creator, Romney, 64, said in his video that Bain Capital started with just 10 employees and grew to hundreds of workers.

While the firm certainly grew, the impact on Bain's targets was often different. "Sometimes I was successful and help create jobs, other times I was not," Romney said in the video.

Romney faces several hurdles to win the Republican nomination and get a shot at Obama: his Mormon faith, his ideological makeover since leaving the Massachusetts governor's post, and the Massachusetts healthcare reform program that became the basis for Obama's national policy.

Still, Romney does have attributes that could appeal to traditional Republicans and independent voters.

The fiscal conservative has the looks and clean-cut image of a 1950s matinee idol. He and wife Ann have been married since 1969, and have five sons and 16 grandchildren.

"Romney would be Obama's toughest challenge. Romney looks presidential -- teeth gleaming white, jaw perfectly sculpted," Robert Reich, labor secretary under President Bill Clinton, said of Romney.

In a Wall Street Journal/NBC News poll last week, Romney came out on top, supported by 21 percent in a nine-candidate field.

Many voters also warm up to Romney's unbridled optimism about the United States.

The title of his 2009 book/policy manifesto, "No Apology: The Case for American Greatness" (the subtitle was revised to "Believe in America" for the paperback edition) was in part a dig at Obama's habit of showing humility on the world stage.

Let Detroit go bankrupt

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for on Tuesday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support - banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around - and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit's automakers.

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. 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.

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.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, "Getting more and more pay for less and less work is a dead-end street."

You don't have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th.

This will mean a new direction for the UAW, profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms - all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

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.

Just as important to the future of American carmakers is the sales force. When sales are down, you don't want to lose the only people who can get them to grow. So don't fire the best dealers, and don't crush them with new financial or performance demands they can't meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research - on new energy sources, fuel-economy technology, materials science and the like - that will ultimately benefit the automotive industry, along with many others.

I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don'task Washington to give shareholders and bondholders a free pass - they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs.

The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk. In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

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Sources: CNN, Fox News, NY Times, Reuters, Youtube, Google Maps

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