Just how much of a role would the government have played in supporting Chrysler and General Motors if Mitt Romney had been president?
As First Read reported yesterday, the former Massachusetts governor has worked to couch his opposition to President Barack Obama's decision to bail out the two car companies -- a decision which Romney, who was raised in Michigan, is being forced to confront heading into the state's Feb. 28 primary.
Democrats and the Obama campaign have made a big issue of Romney's 2008 op-ed in The New York Times entitled, "Let Detroit Go Bankrupt," especially in light of the signs of encouragement in the auto industry since the bailout. He penned it just weeks after Obama secured the presidency.
The piece, published as the automakers were facing a major cash crunch, called for what he dubbed a “managed bankruptcy.” He said the car companies needed to restructure their labor agreements; replace each company's management and rid them of corporate perks; and increase government spending on alternative energy and fuel economy research, which would benefit the industry indirectly.
Of direct government assistance, Romney wrote: "The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk." He stated, declaratively, “Detroit needs a turnaround, not a check.”
Since then, Romney has spoken publicly about the bailout, essentially trying to take ownership for the successes of the auto industry's turnaround while decrying Obama's management of the process. Romney argues that the administration basically ended embracing a variation of the strategy he originally advocated.
"The indisputable good news is that Chrysler and General Motors are still in business," Romney wrote Tuesday in The Detroit News. "The equally indisputable bad news is that all the defects in President Obama's management of the American economy are evident in what he did."
The separation between Romney and Obama on the issue of the bailout stems from two issues. First, Romney argues that interests of the labor unions were unfairly favored over some of GM and Chrysler's private creditors. The government-supervised bankruptcy did this, he argues, by allowing the autoworkers’ retirees program an equity stake in the restructured GM in exchange for providing financial support for the bankruptcy.
Second, Romney appears to differ with the president over the extent to which government itself should have stepped forward with money to help stave off liquidation of GM and Chrysler and provide for the restructuring process. The administration's approach did this in the case of GM by essentially establishing a new, restructured company in which the government became a majority shareholder. (Romney argued Tuesday for the government to divest itself from the company.)
Romney's position in the past has been that the private sector could have stepped forward to finance and more effectively manage the bankruptcy process -- especially in a way that would have treated private stakeholders in the companies more fairly.
The right-leaning editorial page of The Detroit News weighed in Wednesday:
But on the key question of whether the automakers could have managed themselves through a traditional bankruptcy without assistance from the government, Romney is wrong. The loans provided by Bush and then by Obama allowed the domestic auto industry to survive the darkest hour of its history and return to thriving operations today.
Critics also contend that Wall Street might not have been in the position to give that financial assistance to Detroit in 2009, as Lehman Brothers collapsed and global credit tightened.
But Romney appeared to add more uncertainty into his position surrounding the bailouts in an interview Wednesday on Detroit talk radio station WJR. Romney said that the government should have been available to step in and provide financing during a structured bankruptcy by way of a bridge loan -- the initial way in which the Bush administration propped up GM and Chrysler at the end of 2008.
They needed to go through bankruptcy, and if, as part of that process, they needed financial help to get out of bankruptcy -- a bridge loan, or guarantees on sales of cars and so forth -- I said the government should be there to provide that. But the point was they took the wrong process, they wasted a lot of money, and ended up giving the companies to the UAW.
That doesn't necessarily mean that Romney would have pursued the exact path as the Obama administration for restructuring GM and Chrysler, but it does indicate some willingness for a more expansive role for the government during bankruptcy. Spokesmen for the Romney campaign didn't immediately respond to an inquiry seeking clarification.
But in addressing some of the political flak he's taken over the bailout, Romney added on WJR: "I don't imagine that anyone could think I had any interest other than to see the companies to thrive and survive, and that's why the original op-ed piece I wrote describes what I thought was the best way to get that done."