Let Detroit Go Bankrupt: Summary and Analysis
Mitt Romney, the republican governor of Massachusetts, wrote an article in 2008 when the auto industry was on the verge of collapse called “Let Detroit Go Bankrupt”, the article was about his thoughts on how the impending doom of the auto industry in Detroit should be handled. He expressed that Detroit should not be bailed out by the federal government because that would allow the practices that brought GM and Chrysler to their knees to continue, instead let the GM and Chrysler file for bankruptcy, restructure and emerge better company’s. By filing for bankruptcy his idea was that the industry would shed expensive labor agreements, reduce retiree benefits and allow Detroit to be on par with foreign brands in terms of pay and benefits, which would in turn allow them to compete. He also blamed bad management and expressed that the current management at these companies must be replaced.
GM and Chrysler did receive a government bailout after the article was written, and the industry has made a comeback that even the people who supported the bailout could not have foreseen. If Romney’s plan would have gone through instead I believe the auto industry in Detroit would have been finished. According to the Center for Automotive Research (CAR) in Ann Arbor, Michigan, bankruptcy would have caused the loss of 1.14 million auto related jobs in 2009 and caused “additional personal income losses” of 97 billion dollars in 2009 and 2010. A loss of jobs on this scale would have caused a chain effect that would have put the whole state of Michigan in ruin and disrupted the whole nation’s economy.
Another problem with Romney’s plan is that at the time of his bankruptcy idea banks were in an even worse position then the auto industry, and funds for restructuring would have been impossible to guarantee. Without funds to restructure GM and Chrysler would have been broken up and auctioned off to the highest bidder, more than likely a...
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