Former Massachusetts Governor and GOP White House hopeful Mitt Romney is spending more than $1 million dollars in ads in the two weeks before the Michigan Republican primary, possibly outspending rival candidate Rick Santorum roughly 2.5 to 1 if the trend continues.
Romney, a Michigan native who breezed to a victory in Michigan's Republican primary four years ago, is now lagging Santorum in polls. On the evening of Feb. 28, Romney will either be celebrating a squeaker victory, or perhaps reading Thomas Wolfe's "You Can't Go Home Again" on the plane out of town.
Why is Romney behind and scrambling? After judging his Feb. 14 op-ed column in the Detroit News and his Michigan campaign stops, here's one theory: Romney's popularity in Michigan is sinking because he's the only candidate who supported, and still supports, the interests of former Chrysler owner and hedge fund Cerberus Capital Management in the 2009 bankruptcy proceedings of Chrysler and GM, rather than the interests of autoworkers and white-collar executives in Southeast Michigan.
It's hard to believe, but Romney continues to double down on his assertion that General Motors, Ford, Chrysler and myriad auto suppliers -- plus the city of Detroit -- would be better off today had GM and Chrysler been allowed to slip into Chapter 11 bankruptcy without the benefit of the White House's intervention.
He's making that argument the very week that GM announced an all-time annual profit record, as the automaker continues to hire more people in Michigan, and Chrysler expands its Detroit and Southeast Michigan manufacturing footprint.
Politically, Romney's game seems to be to throw as much ideological red meat as possible at Michigan's hardcore Republicans in the western part of the state and the wealthy Oakland County Detroit suburbs. Let's not forget that despite the obvious success of the 2009 bailout, half the Michiganders polled in 2009 were against the government-led rescue on the basis of an ideology that government should stay out of business, period.
Romney and Republicans in general are certainly entitled to their ideological position. But what is especially obnoxious in Romney's op-ed, and in his stump speeches about the bailout, is his outright fictionalizing of the events. His assertion that the companies could have endured a "managed bankruptcy" without the help of the White House is utterly false. To have a managed bankruptcy, there must be a source of investment capital from banks and other sources, such as private equity. With the economy, Wall Street, commercial banks and insurance giant AIG in free-fall in late 2008 and early 2009, there were no such private sources of the $80-plus billion needed in capital at the time.
Though it was the Bush Administration that authorized initial loans to the automakers, President Obama made the call to make additional loans, take an equity share in GM and Chrysler, and facilitate the United Auto Workers Healthcare Trust (the Voluntary Employment Benefit Association) equity in the companies in exchange for the healthcare obligations GM and Chrysler owed employees and retirees.
Romney (who was already stumping for the Republican presidential nomination in 2009) took the same position as the financiers holding GM and Chrysler debt. They said the union's healthcare trust should not have been given treatment in the bankruptcy that was preferential to bond holders, the vast majority of whom were investment firms that merely made made a bet on the falling prices of GM and Chrysler's bonds.
Let's be clear: Without the government's role, GM and Chrysler would have entered bankruptcy with no financing, and then liquidated to pay off debts. That process would have resulted in the companies' being picked apart by creditors -- banks, institutions and investment firms -- with valuable assets like Chevrolet, Cadillac, Dodge Ram and Jeep going at fire-sale prices.
The biggest beneficiaries of such a process? Private equity firms like Romney's former company, Bain Capital, and probably a few foreign companies such as Nissan (which might have wanted Ram Truck or Jeep) and Chinese automakers. Those successful bargain hunters would have had little use today for corporate bases in Detroit or many of the Michigan and Ohio manufacturing facilities and workforces.
Most important to Romney, Republicans and private equity would have been busting the UAW in the bankruptcy process. Romney writes: "While a lot of workers and investors got the short end of the stick, Obama's union allies -- and his major campaign contributors -- reaped reward upon reward, all on the taxpayer's dime."
It's difficult not to contrast Romney's indictment of the UAW's support of President Obama with the huge checks being written to his campaign by private equity and hedge fund managers who want, among other things, to have elected officials maintain the extremely favorable treatment of their personal incomes in the tax code.
Cerberus Capital's ownership of Chrysler was one of the darkest chapters in the company's history. Ask the workers at Chrysler, both blue- and white-collar. Cerberus was a relentless cost-cutter that installed a dysfunctional management team that would have killed off the car and truck-making part of the company if left to its own devices.
The firm opportunistically took Chrysler over from Daimler when the German automaker threw in the towel after trying to integrate Chrysler with its own operation. Cerberus's real aim, according to executives that advised the firm, was not to bring the company back to prosperity, but rather manage its large book of auto loans, strip it down and eventually sell off its most profitable pieces -- Jeep and Ram Truck.
These are the scenarios that Mitt Romney believes would have been better for Michigan, his native state.
Romney's, and the GOP's, biggest beef seems to be with labor, and specifically the UAW. Romney calls the bailout "crony capitalism" and an attempt by President Obama to pay the union back for its contributions to his campaign in 2008. Romney says he wouldn't have "given in" to the UAW.
But Romney's screed ignores the fact that the union gave huge concessions in the bankruptcies, and took equity in GM and Chrysler in exchange for the healthcare obligations owed it. The UAW has a lot of skin in the game now, tied to the success of both GM and Chrysler.
It is ironic that a man who is so tied to private equity investment is criticizing the union for being an equity investor. We'll see in a few weeks if Romney can go home again.
Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos.
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