Mitt Romney, debating Republican presidential rivals in Michigan last night, defended his opposition to a government bailout that saved tens of thousands of jobs at Chrysler Group LLC and General Motors Co. (GM)
Instead of a government intervention, the former Massachusetts governor and Michigan native said, the companies should have immediately entered into private sector bankruptcies. “My view with regards to the bailout was that, whether it was by President Bush or by President Obama, it was the wrong way to go,” he said, during the event at Oakland University in Rochester, Michigan.
Amid the 2008-09 credit crunch, private sector financing for such a deal wasn’t available, according to economists such as Mark Zandi of Moody’s Analytics, an adviser to 2008 Republican presidential nominee John McCain, and independent analysts such as David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Michigan.
“Without the intervention of the Bush and Obama administrations, we would have seen the liquidation of both Chrysler and probably GM,” Cole said in August. “That would have taken the whole industry down. We would have seen a disaster in terms of the job impact.”
Knife in Back
Former Michigan Governor Jennifer Granholm, a Democrat, said in an interview with Bloomberg News that Romney’s position was “a knife in the back” to his home state.
“If it had gone his way, these companies would have been liquidated,” said Granholm, who was governor during the bankruptcies and credited with helping the companies get federal assistance.
Michigan Governor Rick Snyder, a Republican, broke with his party’s presidential contenders just hours before yesterday’s debate began by saying he believed the bailout worked.
“It wasn’t just one or two companies at risk, but the entire national supply chain,” Snyder told the Detroit News. “Losing that would have had a devastating impact on the economy.”
The auto industry’s post-bailout comeback is one reason that Michigan’s economy is recovering from the recession at the second-fastest pace in the U.S., lifted by reviving carmakers and local manufacturers, according to a new Bloomberg index that tracks the pace of states’ growth.
The home to the automobile industry was topped only by North Dakota, where an oil boom is raising incomes and boosting government coffers at the nation’s quickest rate. California, Massachusetts and Illinois round out the top five in the Bloomberg Economic Evaluation of States Index, which uses data on real estate, jobs, taxes and stock prices to measure the growth rate in 50 states and the District of Columbia.
GM shares last traded at $22.31, down 39 percent for this year. Ford shares are down 34 percent, closing yesterday at $11.04. GM sold 6.79 million vehicles through September of this year, positioning the company to take the world’s No. 1 automaker ranking from Toyota Motor Corp.
All eight Republicans participating in the debate have said they wouldn’t have extended government loans to save the two automobile manufacturers.
“I don’t think that’s a good use of taxpayer money,” said former Utah Governor Jon Huntsman Jr. “The people in this country are sick and tired of seeing taxpayer dollars go to bailouts.”
Tea Party Pleaser
That position plays well with their Tea Party backers, whose opposition to government bailouts became a rallying cry that helped Republicans regain control of the House of Representatives during the 2010 elections.
It could come back to haunt the party in the general election when the Republican nominee must appeal to independent voters.
Michigan, typically a Democratic stronghold in presidential races, could become more competitive in 2012 as the struggling economy presents a drag on President Barack Obama’s job performance rating.
Romney, who was born in Michigan and whose father served as its governor, won the state in the 2008 Republican presidential primary. If he wins his party’s nomination, Romney said he will attempt to be the first Republican to win Michigan in a general election since 1988.
“I care about this state and about auto industry like -- I guess like no one else on this stage,” he said yesterday.
His plan for GM and Chrysler, he said, was that “they should go through a managed bankruptcy process, a private bankruptcy process.”
Granholm said there is “residual fondness” for Romney because of his father’s service. “But people should take a hard look at what he’s saying now,” she said. “He is the ultimate panderer in chief.”
Democrats see his opposition to the auto bailout as an opportunity to draw a sharp contrast with Obama, who made expanding government loans to the automakers one of the earliest acts of his presidency.
In late 2008, faced with estimates that as many as 3 million jobs could be at risk, President George W. Bush’s administration extended more than $17 billion in loans from the Troubled Asset Relief Program to GM and Chrysler. Dearborn, Michigan-based Ford Motor Co. (F) didn’t need government financing, thanks to a 2006 refinancing of its debt.
In 2009, the Obama administration provided additional assistance to the two car companies, as well as their financing arms. An auto-industry task force then shepherded the companies through accelerated bankruptcies.
Saving Auto Industry
“One of the first decisions I made as president was to save the U.S. auto industry from collapse,” Obama said, during an Oct. 14 visit to the GM plant in Orion township, just six miles from tonight’s debate site. “Today, I can stand here and say the investment paid off.”
Romney, whose father served as chief executive of American Motors, asserted in a New York Times opinion piece on Nov. 18, 2008, that the companies should have entered into managed bankruptcies before bailout funds were provided.
“If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye,” he wrote in the op-ed published the same day the chief executives of the three automakers appeared in a hearing before the U.S. Senate Banking Committee seeking $25 billion in emergency loans to keep them operating.
“It won’t go overnight, but its demise will be virtually guaranteed,” he wrote.
On the Mend
Almost three years later, the industry is on the mend. Auto manufacturers have added about 133,000 jobs since the two companies emerged from bankruptcy in 2009, according to the Bureau of Labor Statistics.
In addition, union contracts approved last month at GM, Ford and Chrysler promise 20,000 new jobs for at least 34 factories, with Michigan having the biggest share. Those jobs may spawn 140,000 more nationwide.
The new jobs at Michigan auto factories, along with growth in other industries such as biotechnology, may help the state add as many as 70,000 jobs this year, Michael Finney, chief executive officer of the Michigan Economic Development Corp. said last month after the labor contracts were reached.
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