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Compuware chief takes on Detroit Three senate critic
BY PETER = KARMANOS=20 JR. =E2=80=A2 November 19, 2008

U.S. Sen. Richard Shelby, = R-Alabama, has emerged=20 as the leading Senate critic of the proposed aid package for the Detroit = auto=20 industry. It=E2=80=99s pretty clear Shelby has nothing but disdain for = Ford, GM,=20 Chrysler and the United Auto Workers, not surprising considering he = comes from a=20 state with assembly plants for Mercedes-Benz, Honda and Hyundai. Shelby = is in a=20 key position on the Detroit rescue as senior Republican on the Senate = Banking=20 Committee.

Wednesday, he continued his anti-Detroit rhetoric, = saying he=20 didn=E2=80=99t think the U.S.-based industry was going to turn around = without a=20 bankruptcy and the ouster of its leadership.

=E2=80=9CI = don=E2=80=99t think they have=20 immediate plans to change their model, which is a model of = failure,=E2=80=9D Shelby=20 said, dismissing the $25 billion in bridge loan being requested as = =E2=80=9Clife=20 support=E2=80=9D for Detroit.

=E2=80=9CI believe their best = option would be some type of=20 Chapter 11 bankruptcy,=E2=80=9D Shelby said. =E2=80=9CThese leaders have = been failures and they=20 need to go.=E2=80=9D

Shelby actually ratcheted up his = anti-Detroit campaign on=20 the Sunday morning talk show circuit, which drew an interesting response = from=20 Motor City defender Peter Karmanos, chairman and CEO of Compuware Corp., = which=20 moved its headquarters into a new downtown building just a few years = ago.=20

Here=E2=80=99s part of what Karmanos said in a letter to = Shelby:=20

I watched with great interest Meet the Press, during = which you=20 and Sen. Carl Levin debated the merits of (or, concerning your position, = the=20 folly) providing financial aid to America=E2=80=99s domestic auto = industry.

I=20 must admit that I was more than a little taken aback by how out of touch = you=20 really are about what Detroit=E2=80=99s Big Three automakers have been = doing for some=20 time and continue to do to transform their businesses to both survive in = today=E2=80=99s=20 debilitating economic climate and thrive in the future. The steps have = been=20 extremely significant and take it from me=E2=80=94someone who lives and = works in the=20 Motor City=E2=80=94incredibly painful as well.

=E2=80=A6 I can = only trust that you will=20 take some time and conduct the proper due diligence before continuing to = espouse=20 your inaccuracies. At minimum, I believe the domestic auto industry (and = its=20 millions of hardworking, tax-paying employees), which helped make = America great,=20 deserve as much.

Don=E2=80=99t you?

The intent of = this letter,=20 however, is not to take you to task for the inaccuracy of your comments = or for=20 the over-simplicity of your views, but rather to point out the hypocrisy = of your=20 position as it relates to Alabama=E2=80=99s (the state for which you = have served as=20 senator since 1987) recent history of providing subsidies to = manufacturing.=20 During the segment on Meet the Press, you stated that: =

=E2=80=9CWe don=E2=80=99t need=20 government =E2=80=94 governmental subsidies =E2=80=94 for manufacturing = in this country. It=E2=80=99s=20 the French model, it=E2=80=99s the wrong road. We will pay for it. The = average American=20 taxpayer is going to pay dearly for this, if I=E2=80=99m not = wrong.=E2=80=9D

I trust it=20 is safe to say that when you refer to =E2=80=9Cgovernment = subsidies,=E2=80=9D you are referring=20 to subsidies provided by both federal and state governments. And if this = is in=20 fact true, then I am sure you were adamantly against the State of = Alabama=20 offering lucrative incentives (in essence, subsidies) to Mercedes Benz = in the=20 early 1990s to lure the German automobile manufacturer to the State. =

As=20 it turned out, Alabama offered a stunning $253 million incentive package = to=20 Mercedes. Additionally, the State also offered to train the workers, = clear and=20 improve the site, upgrade utilities, and buy 2,500 Mercedes Benz = vehicles. All=20 told, it is estimated that the incentive package totaled anywhere from = $153,000=20 to $220,000 per created job. On top of all this, the State gave the = foreign=20 automaker a large parcel of land worth between $250 and $300 million, = which was=20 coincidentally how much the company expected to invest in building the = plant.=20

With all due respect, Senator, where was your outrage when all = this was=20 going on? =E2=80=A6 I certainly don=E2=80=99t recall you going in front = of the nation (as you=20 did this past Sunday) to discuss what a big mistake Alabama was making = in=20 providing subsidies to Mercedes Benz. If you had, however, you could = have talked=20 about how, applying free market principles, Alabama shouldn=E2=80=99t = have had to resort=20 to subsidies to land Mercedes Benz. Competitively speaking, if Alabama = had been=20 the strongest candidate under consideration (i.e. highest quality=20 infrastructure, workforce, research and development facilities, business = climate, etc.), then subsidies shouldn=E2=80=99t have been required. =

The fact is that Alabama knew that, on a level playing field, it = could not=20 compete with the other states under consideration and, thus, to lure the = German=20 car builder to the State, it offered the aforementioned unprecedented = subsidies.=20 In effect, Alabama =E2=80=94 your state =E2=80=94 did exactly what you = said government should=20 not do: provide subsidies for manufacturing.

It=E2=80=99s no great mystery why Alabama politicians went to such = dramatic=20 anti-free-market measures to secure Mercedes Benz =E2=80=94 they did it = for the=20 betterment of their state through job creation and increased tax = revenues. And=20 who could blame them? Is that so different than what would occur by = providing=20 financial aid to help rescue the domestic auto industry? Such aid would = save=20 millions of jobs and millions of dollars in lost tax revenue.

Additionally, unlike the giveaways Alabama bestowed upon the foreign=20 automaker in question, United States tax payers would be reimbursed with = interest (as they were when Chrysler received government aid in the = early 1980s)=20 for their investment in what is clearly a critically important industry = for=20 America=E2=80=99s present and future.

Peter Karmanos, Jr. is = Chairman and=20 CEO Compuware Corporation

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