Bailout Snub Haunts Presidential Hopeful Romney

Bailout Snub Haunts Presidential Hopeful Romney

By Michelle Krebs June 9, 2011

When Mitt Romney arrived in his native Michigan to raise funds for his 2012 Presidential campaign this week, he got a chilling homecoming in some quarters. Here, he’s haunted not by health care, but by his snub of Detroit automakers and the people who depend on them for their livelihood. Specifically, Michiganders – Democrats and some Republicans – vividly recall Romney’s November, 2008, Op-Ed piece in The New York Times that carried the headline: “Let Detroit Go Bankrupt.” In it, Romney (above, campaigning in New Hampshire) argued against the federal government financing the bailout of General Motors and Chrysler from Chapter 11 bankruptcy. Today, there’s no denying the federal bailout saved millions of jobs, allowed Detroit’s automakers to not only survive but thrive and may have saved the U.S. economy from complete catastrophe.

In his editorial following Congressional hearings on the Detroit Three’s woes, Romney opened with: “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.” He argued that the Detroit automakers needed to “drastically restructure” themselves through bankruptcy, but do so without federal intervention. A prop-up from the government, he contended, would do nothing more than allow GM and Chrysler to “stay the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.”

What’s particularly ironic about Romney’s position is his background. He was a direct beneficiary of Detroit’s glory years for the auto industry. His father, George Romney, was CEO of American Motors Corp. (AMC) and was credited with turning around the then-floundering automaker by focusing on more fuel-efficient vehicles – specifically the Rambler brand – while he attacked his domestic competitors for  emphasizing gas guzzlers. AMC eventually was purchased by Chrysler, not for long-gone Rambler but for its crown-jewel Jeep brand, (which, by the way, had a 55-percent year-over-year sales rise in May). And as a result of his success, the popular George Romney, a moderate Republican who battled the party’s conservative flanks, went on to serve two terms as governor of the state of Michigan. He won his elections by large margins, despite instituting a state income tax during his tenure.

Not surprisingly, son Mitt now is being lambasted by the usual list of Democrat suspects, who accuse him of flip-flopping on the auto bailouts, just as he has with health care, and playing to the conservative winds in order to get elected. Michigan’s powerful Congressman John Dingell said in a press release Wednesday that he hopes Romney “has answers for Michigan’s working families he abandoned two years ago when the American auto industry was in its worst crisis ever. When Michigan families and communities needed his support, he threw them under the bus. Now it’s their turn to let Romney go bankrupt.” Michigan voters won’t forget, warned Dingell. Similarly, Jennifer Granholm, Michigan’s Democratic governor who just completed two terms and was replaced by Republican businessman Rick Snyder, pointed out in an opinion piece on Politico.com titled "Let Mitt Romney Go Bankrupt", that 1.4 million jobs supporting the U.S. auto industry would have been lost under Romney’s proposal.

In his blog post Wednesday, Steve Rattner, who headed President Obama’s Auto Task Force that pushed through the GM and Chrysler bankruptcies and federal bailout plan, noted that Romney’s 2008 editorial advocated a managed bankruptcy to accomplish what the bankruptcy ultimately did: eliminate the cost disadvantage with the transplants, install new management, cut executive pay and eliminate rich perks like private jets, etc. But Rattner correctly points out that Romney was wrong-headed in thinking the managed bankruptcy could be accomplished without an established foundation from federal funding, particularly at the time when credit and the corporate financing markets had dried up after the collapse of Lehman Brothers.

While Democrats are skewering him, Romney also is taking potshots from members of his own party at a time when Michigan is turning increasingly red from blue and will host a key early primary for the 2012 election. At a rally in Detroit on Wednesday, Republican Congressman Thaddeus McCotter, who is considering a longshot run for President in 2012 as well, accused Romney of deserting “Michigan families, entrepreneurs and workers.” Of course, he lumped Romney and opponent President Obama together as having more in common than not.

Meantime, Romney continues to defend his opinion that the automakers should have gone through bankruptcy. In fact, he takes credit for giving the Obama administration the idea. "I think the Obama administration finally did what I told them they had to do" to save General Motors and Chrysler in 2009, Romney told the Detroit Free Press. "The auto companies that were in distress needed to go through bankruptcy." Romney conveniently leaves out the details of how they were to get funding to successfully emerge from bankruptcy as they have done. Time will tell if that plays with voters in Michigan and other Midwestern states heavily dependent on the domestic auto companies now enjoying a stunning turnaround.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.