There is much confusion, even intentional misrepresentation, about Mitt Romney's position on the auto industry bailout — a critical issue for Ohio and Michigan voters.
Mr. Romney believes that the use of an accelerated bankruptcy process to save the industry was the right action. In fact, he called for this process to begin months earlier than it did. But he also believes that it was not only wrong but also illegal for President Obama to pick winners and losers in the bankruptcy process.
Democrats and Republicans alike believe that saving the American automotive industry was in our country's best interest. President George W. Bush started the bailout in 2008. At issue, though, is the proper role of government.
At a recent Toledo event, former New York Mayor Rudy Giuliani said Republicans should avoid talking about the bailout because it's difficult to explain in a 15-second sound bite. The topic is complex but important. We need to get the facts right.
The economy started to crash in 2007. General Motors, Chrysler, Delphi, and other companies were rapidly running out of cash. Ford Motor Co. had prudently restructured its debt just prior to the collapse. As financial markets shut down, bankruptcy for much of the auto industry appeared imminent.
President Bush started government support in October, 2008 — $17 billion to GM and Chrysler. That support continued under President Obama — $63 billion more to GM and Chrysler — to avoid bankruptcy. An accelerated, structured bankruptcy process emerged as the only legal alternative to deal with long-term corporate debt and pension benefits, both union and nonunion.
The Obama Administration, overriding the legal system, ordered the bankruptcy court to wipe out the bondholders and nonunion pension debt — an unconstitutional seizure of property. Union pension benefits were secured with equity in GM and Chrysler.
When the dust settled, union pensions and taxpayers owned both companies. This clearly violated U.S. bankruptcy law, and became the subject of ongoing litigation. It was wrong to use the “crisis” as an excuse to disregard the law and serve a political agenda.
Many people got hurt. Bondholders and white-collar, nonunion pensioners are not nameless, faceless entities. Many bondholders are citizens such as Indiana State Police officers, who invested in those bonds as safe assets to anchor their retirement.
The white-collar pensions represent secretaries, marketing people, and engineers who help design, build, and sell the same cars, under the same corporate flag, as their union coworkers. Still, the security of their retirement was not deemed as important, because they are not represented by collective bargaining.
I applaud Democrats who supported the bailout and now speak against what happened to the nonunion workers at Delphi. For the nation, it represents another Obama Administration decision to pit Americans against each other.
Ohioans lost a disproportionate number of plants, with more likely to follow under the administration car czar's "capacity rationalization" program. Those people who lost their jobs in those plants and auto dealerships are the people who really got hurt.
We need a national energy policy. Our lack of independence is not only killing our auto industry. but also crippling our national security.
It didn't have to be this way. With legally negotiated and proportionate write-downs of assets, and a united effort to get companies back on track, every one could have recovered some of what was lost.
No one now knows the final accounting of the auto bailout, but U.S. taxpayers would lose about $23 billion on GM if their equity were cashed in now. We would make about $20 billion on our ownership of AIG. That's nearly a wash, based on today's stock prices — not a bad deal for taxpayers.
Why did anyone have to be left entirely in the hole? Our laws protect all Americans, not just those in political favor. That's a founding principle of our nation — and one the President’s auto bailout broke.
Richard C. Hylant is president of the Hylant Group, an insurance brokerage and risk-management firm in Toledo.
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