“Trying To Rewrite History”: Mitt Romney’s Views On The Detroit Bailout
Over the weekend, a top GOP aide said President Obama got the idea from Romney. A look at his past positions shows that’s not true.
Over the weekend, top Romney adviser Eric Fehrnstrom made an audacious claim:
“[Romney’s] position on the bailout was exactly what President Obama followed. I know it infuriates them to hear that…. The only economic success that President Obama has had is because he followed Mitt Romney’s advice.”
As Fehrnstrom predicted, liberals are reacting with irritation and incredulity. They point out — not for the first time — that Romney published a New York Times op-ed in November 2008, even before Obama had taken office, headlined, “Let Detroit Go Bankrupt.”
The case is actually a little more complex than that, although Fehnstrom’s claim is still hard to take seriously. To understand how we got here, here’s a brief history of Romney’s statements on the car industry.
During the 2008 primary campaign, Romney won Michigan, a victory that was in part attributed to his promises to save the Motor City’s main industry. “If I am president, I will not rest until Michigan is back,” he said. “Michigan can once again lead the world’s automotive industry.” His campaign contrasted that with John McCain, who said, “I’ve gotta look you in the eye and tell you that some of those jobs aren’t coming back.” Romney’s main policy prescription was a series of federal spending for retraining and green tech, to be doled out in $20 billion chunks over five years. The McCain campaign derided thisas a “$100 billion bailout of the auto industry.”
By November 2008, shortly after Obama’s election, the economy was in free-fall. Here’s an excerpt from Romney’s now-infamous column:
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. Without that bailout, Detroit will need to drastically restructure itself …. Detroit needs a turnaround, not a check.
Romney called for a “managed bankruptcy,” in which company’s executives would be replaced and union contracts would be renegotiated with more favorable terms. Reversing his position during the Republican primary, he said shedding excess workers was now essential. He wanted the government to oversee the bankruptcy but for it be paid for with private-sector funding. But as former Obama administration “car czar” Steven Rattner and others have pointed out, there did not appear to be any private money on the sidelines. Markets were in disarray and credit was drying up fast — and so, they argue, the federal government’s coffers were the only thing standing between GM and the company’s total demise.
In May 2009, Romney appeared on Fox News Sunday with Chris Wallace, who pressed him on the issue:
WALLACE: Wouldn’t that, at a time when we were in the depths of the recession, when we were really right in the midst of what looked like a financial crisis — wouldn’t that have been disastrous for the economy?
ROMNEY: It’d have been precisely the right thing to do for the economy. To help General Motors at that point, before it had received tens of billions of dollars from the government, go through a structured process either in court or out of court to rid itself of its excessive union contract obligations, would have been the right course, and at that point the government could have helped with warranty guarantees and so forth, with debtor possession financing …. We wouldn’t have closed the business down or liquidated it, we instead would have helped it restructure. It was the right course to take, it’s being taken now, too late unfortunately, and as a result the government ends up with more than 70 percent of GM.
Already, we can see Romney struggling with the issue. But the gist of his main answer is already in place: The government funding was wrong, but the restructuring was right.
In June 2011, he reprised this point on the CBS Early Show: “When I wrote that the auto industry was asking for a bailout, we are unwise to send billions of dollars [to companies], instead — finally — the president recognized I was right, and finally took the company, in the case at General Motors, the company finally went through bankruptcy and went through a managed bankruptcy, came out of bankruptcy and is now recovering.”
With the Michigan primary looming in late February 2012, and his numbers sagging as Rick Santorum surged, Romney was again on the defensive. On February 14, he wrote an op-ed in the Detroit News (now paywalled online), writing, “The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.” He appeared with Wallace a few days later, and the host again pressed him. Romney once again insisted that GM could have gone through a managed bankruptcy without federal bailout funds.
That brings us to the present day, and Fehrnstrom’s comments. There have been two important shifts in Romney’s position. The first is from pre-recession, 2008 campaign Romney, who supported a $100 billion government investment in maintaining Detroit jobs, to recession-era Romney, who adopted the idea that the automakers needed pain — including potentially significant job loss — to survive. The major questions here are (1) whether it was feasible for the companies to find private financing to restructure and (2) whether the associated job loss and economic ripple effects would have been acceptable. While Romney is correct that the restructuring was what he suggested, his idea at the time was hardly unique; there was a consensus that the companies needed to be significantly reshaped. The question was how to do it, and he said the answer was without federal funds.
The second shift is from the the stance Romney has taken since his op-ed to Fehrstrom’s comments on Sunday. Fehrnstrom is overreaching in claiming that Obama adopted “exactly” what Romney recommended, given his longstanding opposition to the bailouts. It’s understandable that Romney would want to align himself with the successful rescue of the auto industry: While the bailouts are still unpopular with Americans overall, a plurality agree that they helped the economy. Moreover, the move is comparatively popular in Rust Belt states and among working-class white voters with whom Obama is otherwise weak.
Romney’s position on how to handle the carmakers may not have been realistic, but it was far less cartoonish than his liberal critics have suggested. Trying to rewrite history, however, won’t answer their attack.
By: David A. Graham, Associate Editor, The Atlantic, April 30, 2012
“A Detroiter In His Own Mind”: Mitt Romney And The Automobile Industry
One of Mitt Romney’s problems is that he lays it on too thick. He’s not just a conservative, he’s a “severe conservative”. He feels your pain because he too is “unemployed”. And he understands America’s car industry because he’s a Tigers-cheering motorhead, a true “son of Detroit”.
That last assertion comes in an op-ed Mr Romney wrote for the Detroit News today. And it’s not untrue, per se. The candidate was born in Detroit, though he grew up in Bloomfield Hills, one of America’s wealthiest cities. He probably cheered for the Tigers as a kid, but his position has since evolved. And cars may really be “in my bones”, as he claims, but he advocated letting Detroit go bankrupt in 2008.
The purpose of Mr Romney’s op-ed is to clarify his position on the auto bail-out ahead of Michigan’s primary on February 28th. And the piece rivals Cirque du Soleil in its display of contortions. Mr Romney seems loth to gush about the success of the bail-out, noting only the good news that “Chrysler and General Motors are still in business”. He certainly doesn’t mention that 2011 was the best year for America’s carmakers since the financial crisis, with each of the big three turning a solid profit. But he does imply that this achievement is a result of his own advice. “The course I recommended was eventually followed”, Mr Romney writes.
As with much of Mr Romney’s excessive rhetoric, there is some truth to this statement. Following the bail-outs, the president eventually forced Chrysler and GM into bankruptcy, a step Mr Romney thought should occur naturally. And the government oversaw painful restructurings at both companies, which were largely in line with Mr Romney’s broad suggestions. But the course Mr Romney recommended in 2008 began with the government stepping back, and it is unlikely things would’ve turned out so well had this happened.
Free-marketeers that we are, The Economist agreed with Mr Romney at the time. But we later apologised for that position. “Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk”, we said. But “given the panic that gripped private purse-strings…it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended.” Even Ford, which avoided bankruptcy, feared the industry would collapse if GM went down. At the time that seemed like a real possibility. The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignores this bit of history in claiming to have been right all along.
In other areas of his op-ed Mr Romney is more accurate. Unions did win some special favours in the bail-out deals, though they are not as egregious as the candidate claims. For example, a health fund for retired workers was unfairly favoured over secured bondholders at Chrysler. But an issue like that is unlikely to resonate in Detroit. So Mr Romney must find a way to re-write history, lest he fall further behind Rick Santorum in his state of birth. Mr Santorum didn’t support the auto bail-out either, but he evinces a genuine compassion for blue-collar workers. And he didn’t pen an op-ed predicting, “If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” That’s a difficult statement to walk back.
By: The Economist, Democracy in America, February 14, 2012
“Half-Time In America”: It Isn’t Political, It’s American
Many Republicans want President Obama to fail. That’s completely understandable and defensible, if one is talking about success or failure in his re-election campaign. It’s stunning when that’s extended to the performance of the economy as a whole or any of the nation’s job-supplying industries.
Thus we have uber-political operative Karl Rove complaining about how offended he was by a Super Bowl TV ad, sponsored by Chrysler, which extolled the recent resurrection of the nation’s auto industry. The ad featured tough-guy actor Clint Eastwood talking about the remarkable comeback of the auto industry, and underscoring the qualities which truly characterize the best of America—resilience, optimism, sacrifice, and hard work. The script of the commercial, “Halftime in America,” is as inspiring as any speech made by an actor in a movie or a political candidate in a campaign:
It’s halftime in America, too. People are out of work and they’re hurting. And they’re all wondering what they’re going to do to make a comeback. And we’re all scared, because this isn’t a game.
The people of Detroit know a little something about this. They almost lost everything. But we all pulled together, now Motor City is fighting again.
I’ve seen a lot of tough eras, a lot of downturns in my life. And, times when we didn’t understand each other. It seems like we’ve lost our heart at times. When the fog of division, discord, and blame made it hard to see what lies ahead.
But after those trials, we all rallied around what was right, and acted as one. Because that’s what we do. We find a way through tough times, and if we can’t find a way, then we’ll make one.
All that matters now is what’s ahead. How do we come from behind? How do we come together? And, how do we win?
Detroit’s showing us it can be done. And, what’s true about them is true about all of us.
This country can’t be knocked out with one punch. We get right back up again and when we do the world is going to hear the roar of our engines.
Yeah, it’s halftime America. And, our second half is about to begin.
Really, could anyone have a problem with that ad? It featured scenes of Detroit, and of middle-class people, working hard in a struggling economy and trying to make their city and their lives better.
Yes, Rove had a problem with it. He said he was “offended” by the spot, adding on Fox News:
I’m a huge fan of Clint Eastwood, I thought it was an extremely well-done ad, but it is a sign of what happens when you have Chicago-style politics, and the president of the United States and his political minions are, in essence, using our tax dollars to buy corporate advertising.
Rove seems to be referring to President Obama’s bailout of the auto industry, and suggesting that somehow that money was used to pay for a thinly-disguised campaign ad for the Obama re-election campaign. A lot of Republicans were opposed to the bailout, saying the companies should be subject to the rules of capitalism. GOP presidential contender Mitt Romney famously penned a New York Times op-ed entitled “Let Detroit Go Bankrupt.”
What is it about Detroit that so many conservatives despise? That it’s a still-breathing example of the “old economy?” Is it Motown music they hate, or the fact that it’s full of labor union members? Is the distaste for struggling Detroit so pronounced that people actually want the city to fail?
Had the auto companies indeed failed despite the bailout, Rove and Romney would have looked brilliant. But the companies are recovering nicely, paying back their loans (with interest), and making profits, in part because of concessions made by the labor unions so despised by conservatives.
There is surely a legitimate philosophical argument to be made that the government should not bailout out big businesses (an argument not often extended to include huge tax breaks for profitable industries). Pure capitalism indeed stipulates that businesses should succeed or fail on their own. Critics can legitimately argue that government should not prop up any industry, no matter what the implications for employment. They can be angry that the auto bailouts happened, but it’s unconscionable to be angry that the bailouts worked. Comebacks—as the New York Giants proved, winning the Super Bowl after an uneven season—are about as American as it gets.
By: Susan Milligan, U. S. News and World Report, February 7, 2012
“Let Detroit Go Bankrupt”: Mitt Romney In His Own Words
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.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — 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.
I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”
You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. 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.
The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. 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.
Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.
Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.
It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.
But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.
The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.
In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.
By: This article originally appeared in The New York Times on November 18, 2008, written by none other than Op-Ed Contributor, Willard Mitt Romney, a current candidate for the GOP Republican Presidential Nomination
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