I know I’m not the first person to write about Mitt Romney’s opinion regarding the auto bailouts, and I’m sure I won’t be the last. In the interest of an informed political discussion, I thought we might benefit from a review of what Romney actually wrote in his 2008 New York Times op-ed “Let Detroit Go Bankrupt”.
This issue returned to the forefront of our collective memory recently when Romney tried to “take a lot of credit” for the auto industry’s recovery. People were understandably miffed by this statement, but I believe that a lot of what Romney originally wrote has been lost in the political shouting match that ensued.
He wrote, “A managed bankruptcy may be the only path to the fundamental restructuring the industry needs… The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.”
General Motors and Chrysler did end up going through a managed bankruptcy process. However, this process could not have been funded by private banks and investors, as Romney suggested. As has been widely reported, such sources of private investment had dried up in late 2008, when the bailout was in progress.
Bob Lutz, a Republican who was an executive at GM in 2008, said, “What he [Romney] conveniently forgets is that there was zero liquidity in the country. There was no way to fund a private Chapter 11 — even though, believe me, General Motors really tried to get private debt financing or organize a private Chapter 11. But there was no money to do it.”
So the only way for GM and Chrysler to get the funding they needed in order to undergo bankruptcy reorganization was through the federal government. (By the way, the Canadian government also contributed about $3 billion to the auto bailout.)
To be fair, Romney did suggest federal loan guarantees, but only for “post-bankruptcy financing”, so this wouldn’t have helped to get the funding Detroit needed for reorganization.
But the rest of what Romney wrote in “Let Detroit Go Bankrupt” is actually pretty reasonable.
He also said, “The new management must work with labor leaders to see that the enmity between labor and management comes to an end…This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.”
That’s actually not far off from the agreement that was reached between the car companies and the UAW. All those involved in the restructuring realized that each party would have to sacrifice a little in order to reach an acceptable compromise.
My favorite suggestion of Romney’s was, “The need for collaboration will mean accepting sanity in salaries and perks… 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.”
That was a great idea. Too bad it wasn’t done.
Finally, I feel that it’s important to emphasize that Romney was not against all government support of the auto industry. As he said in the op-ed, “It is not wrong to ask for government help, but the automakers should come up with a win-win proposition.”
I could be wrong, but I think this may indicate that Romney was arguing against giving the auto industry the same sort of no-strings-attached handouts that the banks got, rather than about withholding government funds and letting the auto industry collapse.
Does Romney deserve credit for the auto bailout? No. He wasn’t even in the room. But neither was he suggesting that the auto industry should collapse.
Who knows? Maybe it’s just Romney’s inability to stick to his convictions that makes it so easy for people to question his motives.
Come back tomorrow for a discussion of Romney’s proposed budget.