WASHINGTON -- When Mitt Romney told a crowd in Ohio last week that he had read a report saying Jeep was "thinking of moving all production to China," there was at least a potentially defensible explanation.
A Bloomberg story published the previous Monday had stated that Fiat, which owns Chrysler, "plans to return Jeep output to China and may eventually make all of its models in that country."
A line was added to the Bloomberg story after it was published stating that Mike Manley, chief operating officer of Fiat and Chrysler in Asia, was referring to "adding Jeep production sites rather than shifting output from North America to China." The Romney campaign told The Huffington Post on Tuesday that the update was after Romney made his remark on Thursday. It's not clear whether that's true or not, but what is known is that Chrysler refuted press reports about the Bloomberg story before Romney spoke Thursday evening in Defiance, Ohio.
What has confounded many political observers, and provoked a spirited counteroffensive from the Obama campaign -- including their own TV ad -- is why the Romney campaign then aired in Ohio a TV commercial that implied the auto bailout had hurt the auto industry and that Chrysler was sending U.S. jobs to China. Chrysler told HuffPost the company has added 11,200 U.S. jobs since going through a managed bankruptcy backed by federal bailout dollars in late 2008 and early 2009. And while Chrysler is going to make Jeeps in China for the Chinese market rather than selling U.S.-built models in China, the company said it is expanding production rather than shifting it, adding shifts and hiring workers in the U.S. at the same time.
A source close to the Romney campaign told The Huffington Post, unrelated to the Romney ad, that Sen. Rob Portman (R-Ohio) had been a driving force for weeks pushing the campaign to talk more about the auto bailout and to go on offense, but it's not clear that the senator had any input on the TV ad.
The Romney campaign agreed to talk about the issue more broadly on background. HuffPost spoke with a senior policy adviser to Romney who agreed to answer questions on the condition that he not be identified. The Romney adviser argued that if Chrysler adds jobs in China, that amounts to jobs the automaker is not creating in the U.S.
The adviser said that the auto bailout's success is "relative."
"We still own, what, 40 percent of GM? And 40 percent of the financing arm of GM and Chrysler. So that they've recovered is a relative term," he said. "They're obviously still, they're obviously still in business, but the current estimate from the Treasury Department is that the United States government is going to lose $25 billion as part of this. And so that's a real cost."
As for why the Romney commercial implied that U.S. jobs were being outsourced to China when Chrysler is in fact adding jobs in the U.S., the adviser said he did not know if Chrysler was adding domestic jobs -- they are -- and argued that jobs added in China essentially equal jobs not added in the U.S.
"Chrysler has the option of serving the Chinese market. They could do it in any number of ways. I think one of those ways is to increase production here in the U.S. And instead they chose to increase production in China," the adviser said. "The idea that even if they're adding, say 200 jobs here in the U.S., and adding, you know, 200 jobs in China, doesn't mean that they wouldn't be adding 400 jobs in the U.S. if they weren't adding those 200 in China."
The adviser tried to avoid openly criticizing Chrysler, focusing his comments on Obama's promises.
"Our point isn't so much about Chrysler," he said. "The question though is whether the president, when he goes out and says that the auto bailout was a success in saving U.S. jobs and saving the U.S. auto industry, there's important context provided by, well what has that actually meant in terms of how is Chrysler growing?"
But the logic behind the Romney adviser's argument -- that if a private company gets government funds it should only create U.S. jobs -- suggests a level of government influence over private enterprise that is counter to conservative free-market thinking.
Here is a lightly edited transcript of the interview, beginning with an explanation of Romney's remark at the rally in Ohio last Thursday.
Romney Adviser: [Romney was] working off of Bloomberg reporting that day, that hadn't been -- the way it was written before they updated it basically quoted a Chrysler executive saying that they were going to be producing all their Jeep models in China. So without any further context around that, it sounded like, 'Oh, you guys are moving your Jeep production to China.' So that's the point that Portman and the governor made.* Bloomberg subsequently updated their story.
*Portman did not comment in Ohio on Jeep moving production to China.
HuffPost: Do you have a sense of when they updated their story?
RA: It was later that day. I think after the governor's comments Chrysler started getting a lot of questions about exactly this issue, and Chrysler was like, 'No, no, no, what we said was we're going to start making all our Jeep models in China. We're saying we're going to start production of all of our Jeep models in China, not that we're going to stop production anywhere else and move them to China.'
HP: If they are saying we are expanding production to the Chinese market and building in China, a couple questions off of that. One would be just from the commercial, if you guys have a problem with them -- the commercial implies that there is a problem with them building cars in China for the Chinese market. Obviously you know that the reason they would do that is because of the tariffs largely. That's my understanding. What is your alternative to that?
RA: I think there's two things that are there. One, generally a company deciding to locate production overseas to serve an overseas market isn't anything that is, from a public policy standpoint, necessarily objectionable. But when you're in a situation where you have a company that has received a large infusion of public dollars to continue operations, there is something of a difference implicated into that. Obviously the reason that President Obama said that he put all of that public money into GM and Chrysler, was to save U.S. jobs. And obviously a company that is going to start, going to expand production but do it elsewhere, that doesn't expand U.S. jobs. So it comes back to the question of whether the president's expenditure of public dollars in that way was a successful intervention into the marketplace, and whether the president's claim that his actions saved the U.S. auto industry, it's important context.
HP: Okay, and is it your argument at all that the expansion into China, or the expansion of production of in China, what's the relationship to U.S. jobs? Is it a plus and minus relationship where if they expand jobs in China they're not -- not necessarily subtracting jobs from the U.S. but rather not adding them here, or are you saying that they are subtracting jobs from the U.S.? What's the sort of parallel there?
RA: I think we would say that Chrysler has the option of serving the Chinese market. They could do it in any number of ways. I think one of those ways is to increase production here in the U.S. And instead they chose to increase production in China. So I think that's important context for the president's claims regarding the auto bailout.
HP: So the argument, just to make sure I understand it, is that if the company is infused, has received taxpayer dollars, they should make it their priority to expand production and jobs in the U.S. rather than abroad?
RA: Well our point isn't so much about Chrysler. It's about the president's action, the president's bailout, and the president's claims about that. Our point is obviously U.S. industries and other companies should be making decisions based on the economics of their circumstance. The question though is whether the president, when he goes out and says that the auto bailout was a success in saving U.S. jobs and saving the U.S. auto industry, there's important context provided by, well what has that actually meant in terms of how is Chrysler growing? how is Chrysler changing? How is Chrysler conducting its business?
HP: And is it correct, I've seen reports that Chrysler is adding jobs in Ohio. Is that your understanding?
RA: I actually don't know.
HP: I mean, if that's the case, it would seem that whether or not they're adding production in China is not hurting their ability to add jobs in the U.S.
RA: Well, I mean ... the idea that even if they're adding, say 200 jobs here in the U.S., and adding, you know, 200 jobs in China, doesn't mean that they wouldn't be adding 400 jobs in the U.S. if they weren't adding those 200 in China. The fact that they may be expanding jobs here in Ohio doesn't mean that they couldn't choose to serve the China market from Ohio and add those jobs in the U.S.
HP: I had three more questions and then --
RA: Can I jump back to one thing for a second?
RA: I would say there are some questions about the context in which the president's bailout should be viewed. But then there's a second issue of, what has the president done to make the United States a more attractive place for manufacturing, to serve the international market?
HP: Well that was going to be one of my questions is what he would do to reduce the obstacles, such as Chinese tariffs?
RA: The president hasn't had a trade agenda. The president hasn't had an economic policy with respect to China, frankly. And so the president hasn't done anything that's made it easier for U.S. firms to manufacture here in the United States, and interact with the Chinese markets.
HP: And what would Mitt Romney do to do that?
RA: Well Mitt Romney has a multi-part trade agenda, including confronting China on its currency manipulation. So there are things we want from China that we feel we need to actually ask for if you want to get them, and confront them about the artificially low costs that they have, in part because of the manipulation fo their currency.
HP: The commercial states that he has a plan for the auto industry. What is the plan?
RA: His plan for the auto industry is the plan for manufacturing in general. That's corporate tax reform. So we're going to lower U.S. rates, which are the highest in the industrialized world, so that we have rates that are competitive. We're going to move to a territorial tax system which would allow for firms to reinvest the profits that they earn abroad in the United States. That's one thing you should look at. It is easier for Chrysler, when they sell a car in China, to leave that money in China and to invest it in China, and to keep doing production in China, than bringing it back to the United States and having production here. That's because we have a worldwide tax system that essentially double-taxes all the earnings that are earned abroad. Also, looking at energy, one of the highest, most important costs for any manufacturer is energy, and the governor has a plan to expand domestic energy production, which would lower costs for manufacturers. We've got regulatory reform, that again, right now we've got requirements that make it harder for manufacturers to expand production, so we want to have a regulatory climate that one, rolls back the Obama stuff but also places a cap on federal regulations so that you don't have new regulatory burdens on our manufacturers. So there's a lot of things the governor has proposed to make the United States a better place for people to make things and build things.
HP: The commercial talks about Obama forcing the auto companies into bankruptcy, which is accurate, but it shows a picture of cars being crushed. Is that misleading, since the auto industry is doing, has recovered?
RA: We still own, what, 40 percent of GM? And 40 percent of the financing arm of GM and Chrysler. So that they've recovered is a relative term. They're obviously still, they're obviously still in business, but the current estimate from the Treasury Department is that the United State government is going to lose $25 billion as part of this. And so that's a real cost.
I actually have one other point. In addition to the China thing, just yesterday the chairman of Chrysler gave an interview, or CEO maybe, that indicated they were thinking about expanding Jeep production in Europe for the U.S. market. And so, you know, it's one more data point that indicates that the fact is that we, the president entered into an aggressive intervention into the market, did so on the basis of expanding U.S. jobs and saving the U.s. auto industry, and at least one firm that benefitted from this intervention is taking steps to increase and expand but not here in the U.S., and in fact in foreign countries.
HP: Isn't it a part of growing any business, which helps you expand jobs in the U.S., being profitable overall? Granted, if Romney at Bain would have done something like this he might have been hit for outsourcing, but isn't this part of growing a business so that you can be overall more healthy and have more cash flow, have more ability to hire?
RA: Well, yeah, and again the issue for us isn't the activity of Chrysler. It's the consequences and the context in which voters are viewing the president's bailout. So the facts are what they are with respect to the decisions Chrysler is making. And Chrysler as a corporation has every right to make the decisions it's making. The point is that the president goes around talking about the auto bailout as having been this massive success, but in fact there are a lot of indications that there have been consequences other than those that the president likes to highlight. And we think those are salient facts for voters.
UPDATE: Bloomberg News spokesman Lee Cochran contacted The Huffington Post Wednesday to correct the assertion by the Romney campaign that the original story published Monday, Oct. 22, was updated after Romney made his comment in Defiance, Ohio on Thursday, Oct. 25. Cochran said the Bloomberg story was updated on Oct. 22 with information clarifying that Chrysler was not shifting jobs overseas.