Ten months later, after he had left the race, the Detroit native advocated that the government let General Motors Co. (GM) and Chrysler Group LLC go bankrupt rather than extend a federal bailout -- a course that a bipartisan chorus of elected officials, including Michigan’s Republican Governor Rick Snyder, say would have been fatal for the U.S. automotive industry, leading to massive job losses.
Now, Romney takes credit for recommending a version of the restructuring that turned around the now-thriving car companies. GM today announced earnings of $9.19 billion in 2011, the largest profit in its 103-year history, and the company retook the global auto sales lead from Toyota Motor Corp. (7203) last year.
For Romney, facing a strong challenge from Rick Santorum in his second run for the Republican presidential nomination, the shifting stands on the auto-industry bailout underscore a persistent criticism lodged against him -- that the former Massachusetts governor has changed positions for political expedience. His argument also places him on the wrong side of one of the few economic success stories voters have witnessed.
“Michigan very uniquely believes that the impact on the auto industry was positive, and that it was a necessary act, and Mitt Romney has a challenge to try and explain his position against doing that,” said Bernie Porn of EPIC-MRA, a Lansing- based research company.
Santorum Opposed Bailout
The issue may not attract much attention in Michigan’s Feb. 28 primary because Romney’s chief rivals, including Santorum, also opposed the auto-bailout plan. Santorum, a onetime Pennsylvania senator, is leading Romney in state and national polls.
If Romney gets the nomination, Porn said, it will be “the cutting issue, and something that will be” to President Barack Obama’s “advantage in Michigan.”
During his 2008 primary campaign, Romney went to Michigan and assailed his prime competitor, Arizona Senator John McCain, for saying the car-making jobs that had been lost “aren’t coming back.”
‘Where Is Washington?’
“The question is, where is Washington?” Romney told reporters on Jan. 12, 2008, in Ypsilanti, outside a General Motors plant that had just laid off 200 workers. “Are we going to let the entire automobile industry, domestic manufactured automotive industry, disappear and just say, ‘Well, that was tough, that’s just the way it is?’”
A campaign aide, who wasn’t authorized to speak publicly about the issue, said this week that Romney was talking about boosting energy research that might benefit the industry, not a direct bailout.
Two weeks after McCain lost the general election to Obama, as the Bush administration was debating a bailout, Romney wrote in a Nov. 19, 2008, op-ed in the New York Times, under the headline “Let Detroit Go Bankrupt,” that if the bailout happened, “you can kiss the American automotive industry goodbye.”
His proposed alternative -- a “managed bankruptcy” to allow the car companies to restructure -- wasn’t feasible, according to Republicans and Democrats involved in the industry rescue who said there was no entity at the time willing to provide the money that would have been needed to prop up the companies while they reorganized.
“It wasn’t just that there wasn’t credit available; a lot of private equity had cash, they just weren’t giving it away,” said Tony Fratto, a Republican strategist who was an aide to President George W. Bush when the initial $17 billion in bailout loans were extended in late 2008. “It was a very uncertain situation.”
Bush, speaking to auto dealers gathered in Las Vegas for a recent conference, said of the bailout: “I’d do it again.”
Prominent Michigan Republicans, including Snyder and U.S. Representative Fred Upton, also have said the bailout was necessary. Differences aside, Snyder endorsed Romney as “the best choice” in an op-ed column today in the Detroit News that made no mention of the bailout.
The rescue “was the right thing to do,” Upton, who has also endorsed Romney, told Bloomberg Television in a Dec. 3 interview, adding that the car companies “wouldn’t have survived” without the government’s help.
Steven Rattner, who advised Obama on the bailout, said Romney’s course would have immediately led to “an economic meltdown of proportions we have not seen in this country.” That would include a “deep, deep depression in Michigan,” affecting car factories, the suppliers that feed them, and even day-care centers and bars used by millions of workers, he said.
“If the advice that he had prescribed in November of 2008 had been followed by either the Bush administration or the Obama administration, we would have today no auto industry, no Detroit, no state of Michigan -- no exaggeration,” Rattner said in an interview. “Both administrations concluded there was no such thing possible as a managed bankruptcy.”
Romney defends his position that the government shouldn’t have provided direct help to the car companies and advocated it anew in a Feb. 14 op-ed in the Detroit News that called Obama’s management of the bailout “crony capitalism on a grand scale.” He charged that the president hampered the auto industry’s recovery by using the rescue to enrich union supporters, even as he went along with the restructuring Romney had suggested.
Emerging From Bankruptcy
“The course I recommended was eventually followed,” Romney wrote, noting that GM and Chrysler quickly emerged from bankruptcy in mid-2009.
The piece drew criticism from Mike Jackson, chief executive officer of AutoNation Inc. (AN), the largest auto-dealer group in the U.S., who called it “truly reckless, detached from reality, and dishonest,” as well as “very bad politics, especially in Michigan.” Jackson, who has been a Romney advocate, said in an e-mail to Bloomberg News the assertion that private financing should have been used to fund GM and Chrysler bankruptcies was “fantasy,” adding, “Everyone knows we were in the midst of the greatest financial meltdown since the 1930s.”
Some Republican strategists believe Romney’s argument could resonate with bailout-weary voters in Michigan and other industrial states such as Ohio, Indiana and Illinois, who are suspicious of government intervention even as they are pleased with the outcome of the automobile rescue.
Of Two Minds
“Most Americans out there are of two minds on this,” Fratto said.
Obama has begun making the resurgence of Detroit-based GM and Chrysler, which is majority-owned by Fiat SpA (F), a selling point in his re-election campaign. He leads Romney in Michigan for the first time in more than a year, Porn said, with backing from 48 percent compared with 40 percent for Romney in Jan. 25 poll.
Michiganders have overwhelmingly backed the bailout, Porn added. The last time his firm polled on the topic, in December 2010, 65 percent thought it was a good idea to provide the loans to the auto companies, including 81 percent of Democrats, 64 percent of independents, and 51 percent of Republicans.
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