In the last debate , Obama challenged folks to “check the record” re: what Romney said about the auto bailouts.
Ok, we did … and it’s very interesting.
Obama was talking about a 2008 op-ed in the NY Times.
Yeah, the op-ed was titled “Let Detroit Go Bankrupt”.
That’s inflammatory since most folks think that “bankrupt” and “go out of business” are synonymous.
They’re not.
Bankruptcy is a process for stabilizing a failing company … not necessarily – and not usually – a liquidation (think practically every airline).
Romney was arguing that GM should go through the process and follow the in-place bankruptcy laws … rather than having the Feds dictate the terms for winners & losers.
What Romney opposed was dishing bailout checks … and letting taxpayers pick up the tab.
Specifically, he said “Detroit needs a turnaround, not a check. “
His plan had a couple of basic components:
- New labor agreements to neutralize the $2,000 per car cost disadvantage
- New management from best of breed non-automotive industries (think Alan Mulally – the turnaround guy that Ford got from Boeing)
- A new labor-management relationship … “Getting more and more pay for less and less work is a dead-end street.”
- A strong dealer network … “When sales are down, you don’t want to lose the only people who can get them to grow. “
- $20 billion in gov’t funded research … “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. “
- “The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.”
In short, “a managed bankruptcy … not a bailout check.”
No mention of letting the industry die.
Obama better hope that nobody in Ohio or Michigan takes his advice and checks the record.
* * * * *
While we’re at it … yes, there were winners – mostly members of the UAW.
And there were losers like:
- GM bondholders (think retirees and widows) whose secured loans were subordinated to the UAW
- The 20,000 non-union Delphi salaried retirees, who lost their pensions and benefits programs as they were headed into retirement
- The profitable GM dealerships that were closed because they spoke out against the Fed’s bailout process (I personally know the principles of one such dealership in Baltimore).
- US taxpayers who are still holding the bag for the $25 billion bailout Source
Again, Obama better hope that nobody in Ohio or Michigan takes his advice and checks the record.
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