Wednesday, February 15, 2012

"Let Detroit Go Bankrupt"

Mitt Romney, Age 12

Here are the results of the most recent polls in Michigan, where a lose by Romney would do his political aspirations serious damage:

Santorum Lead
Feb. 14  
Feb. 13  
Feb. 12  
Feb. 12  

Nate Silver (at the FiveThirtyEight blog on the New York Times' website) notes that Public Policy Polling's (PPP) method of robo-call polling may be overly weighted in favor of the most zealous potential voters:
Automated polling firms, like Public Policy Polling, often have low response rates, meaning that they tend to poll only the most enthusiastic supporters. At the same time, turnout in primaries and caucuses is normally quite low — so if a poll’s sample is biased in the direction of more enthusiastic voters, it may nevertheless have strong predictive power.
He notes that PPP's poll, which has Santorum up by the greatest amount, 15 points has actually tended to underestimate Santorum's success this year:

Michigan is a state where Romney is trying to paint himself as a native son, given his father's service as governor following  success as president of American Motors Corporation in Detroit.  As recently as two weeks ago, Romney was projected to be some sixteen points up in Michigan. That was before Santorum consolidated his preferred status with the far right by sweeping Missouri, Minnesota and Colorado.  Romney is trying hard to restore his native son status in Michigan with this pretty hokey ad:

Here is what the Romney campaign may be afraid Michigan voters are likely to remember about him however:
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.
That are the introductory paragraphs to Mitt Romney's op-ed piece in the New York Times in mid-November 2008, a piece entitled "Let Detroit Go Bankrupt."   If one bothers to get past the first few paragraphs, Romney lays out an approach to a managed bankruptcy of the auto industry that Presidents Bush and Obama essentially collaborated on to restore the American auto industry.  The only major difference was that Bush and Obama used public monies to fund the restructuring instead of private equity, as Romney claimed was the best way to go.

Romney has tried to mollify Michigan voters through a new op-ed piece in yesterday's Detroit News, claiming his 2008 op-ed was written because he wanted to see the industry saved, but in the right way, using private equity to fund the re-organization of the industry.  In it he essentially argues that the bailout was crony capitalism designed to reward the unions at the expense of American taxpayers.  He argues that the unions were rewarded through protection of their pensions and retiree health benefits.  (That criticism  is sure to sell well in Michigan!)  He also argues for the government to immediately sell its remaining shares in GM, and return the money from the sale to the American taxpayer.  He doesn't bother to address the question of whether today is really the best time to sell the shares to maximize return for the American taxpayer. Given the recent strong growth in GM profits, $8 billion, the largest profits in its history, one might question his wisdom in arguing for an immediate sale.  An immediate sale would lock in the U.S. taxpayers' cost of funding the bailout at about $18 billion dollars, a nice hearty number for a GOP candidate to highlight in the fall presidential campaign.

A piece at Bloomberg blog today argues that things may not go as well for GM (and the U.S. Taxpayer) in 2012 and going forward.  One point made is that the record profits for GM occurred in the wake of the Japanese tsunami, which caused chaos to the supply chains in Japan and reduced the availability of Japanese made vehicles. 

Yesterday, Obama's auto bailout director,  Steve Rattner, responded to the new op-ed and called Romney's position on private equity funding of the restructuring "clueless."
"Romney's op-ed piece once again demonstrated that he is either completely clueless or thoroughly disingenuous when it comes to the auto rescues," Rattner said Tuesday. "The fact is that had the government not stepped in (under both President Bush and Obama), GM and Chrysler would have closed their doors and liquidated, bringing down the entire auto sector, with them. With suppliers also closed, Ford would have had to shut, at least for a time. More than a million jobs would have been lost. Michigan, and the entire industrial Midwest, would have been devastated."
"Romney's suggestion that private capital could have been found is utterly fantastical. The Auto Task Force spoke diligently to every conceivable provider of funds and at that moment, with the stock market in free fall and the economy shedding 700,000 jobs a month, no one — I repeat, no one — had the slightest interest in funding these companies on any terms. I challenge Romney to produce one single individual, investment fund or other source of money that can demonstrably disprove the conclusion of every member of the Auto Task Force and virtually every independent expert who was consulted."

No comments:

Post a Comment