Mitt Romney saved Detroit? Really?
Presumptive GOP presidential candidate Mitt Romney is again claiming credit for saving the U.S. automobile industry. On Monday the former Massachusetts governor visited a manufacturer of truck parts in Euclid, Ohio, where he was interviewed by a local television station. The reporter noted that the manufacturer, Stamco Industries, may owe its survival to the federal government’s decision to throw lifelines to General Motors and Chrysler in early 2009. Romney responded by giving his own version of events:
“My own view, by the way, was that the auto companies needed to go through bankruptcy before government help. And frankly, that’s finally what the president did. He finally took them through bankruptcy. That was the right course I argued for from the very beginning. It was the UAW and the president that delayed the idea of bankruptcy. I pushed the idea of a managed bankruptcy. And finally when that was done, and help was given, the companies got back on their feet. So I’ll take a lot of credit for the fact that this industry’s come back.”
Romney is referring to an op-ed titled “Let Detroit Go Bankrupt” that he wrote for the New York Times in November, as the Big Three were seeking multiple billions of dollars in government loans to help GM and Chrysler survive through the recession. Congress rejected the automakers’ plea the following month, but President George W. Bush unilaterally decided to lend the two companies $17.4 billion on the condition that they deliver a plan within 60 days to restructure and achieve long-term viability.
We on The Times’ editorial board called repeatedly (six times, in fact, from December 2008 to March 2009) for the automakers to go through bankruptcy instead of receiving a simple bailout. Like Romney, we were more comfortable with the idea of a federal judge overseeing the restructuring of GM and Chrysler than the administration doing so. But we recognized that the companies couldn’t even have gone through Chapter 11 had the government not stepped in with help before and during the process.
Romney’s recap ignores the fact that GM and Chrysler were virtually broke when they went begging for Washington’s help. There were no lines of credit available, no lenders queuing up to help them with their cash-flow problems. So the federal government faced a choice: provide some form of aid or watch the companies go into liquidation, which would start dominoes tumbling throughout the auto industry.
The latter option would have been risky enough during good economic times, but it was too horrific to contemplate in the depths of a recession that already was claiming millions of American jobs. So the real issue wasn’t whether to provide aid, as Romney suggests. It was what strings to attach.
Both Bush and President Obama demanded significant changes by GM and Chrysler as condition for the aid they needed to get through the restructuring process. And although Romney’s right about Obama trying to avoid sending the companies into bankruptcy, the companies were even more resistant because of the potential damage to their brands.
Besides, bankruptcy wasn’t really the goal, just a means to get there. The desired end was a pair of companies that could compete today and invest in the technologies and infrastructure needed to compete tomorrow. That meant significant cuts to operating costs (labor in particular), reduced debt and new management, among other major changes. If GM and Chrysler could have achieved those without going into bankruptcy, that would have been ideal. But they couldn’t, largely because their creditors weren’t willing to make the kind of sacrifices that their unions had agreed to make.
Romney seems to be trying to have it both ways on this issue. He’s been sharply critical of the role the administration played in managing the companies’ bankruptcies, while also trying to claim credit for the fact that the companies were rescued through that process. If the surprisingly swift rebound of GM and Chrysler proves to be no fluke, all the credit will belong to two groups of people: the ones involved in the restructuring talks, and the workers and managers who implemented the changes.
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