Of all the issues broached in the presidential campaign this year,
the auto-industry rescue of 2008-09 stands out as an example of the
triumph of spin over facts.
Keying off the New York Times's headline for Mitt Romney's 2008 op-ed, "Let Detroit Go Bankrupt," President Obama has argued that the only alternative to his "bold" rescue of General Motors and Chrysler would have been a disorderly liquidation of the entire U.S. auto industry. Yet a close reading of Mr. Romney's op-ed reveals that his proposal was actually quite similar to the course of action the president took, right down to government funding of the bankruptcy reorganization process and warranty backstops.
So if the auto bailout is not simply the choice between government intervention and the collapse of an entire industry, what is the difference between the two candidates' positions?
When the president forced GM GM -0.99% and Chrysler into bankruptcy court, the White House's auto task force used the process to execute a prearranged reorganization it had masterminded with political allies. By contrast, Mr. Romney called for a true bankruptcy, in which creditors and stakeholders negotiate reorganization together, with the government merely providing the minimum support needed to prevent disorderly liquidation. In retrospect, Mr. Romney's approach not only would have produced outcomes superior to the president's, it was actually the braver course of action.
To understand why, it is necessary to examine GM and Chrysler's behavior in the weeks and months that preceded their bailouts. Thanks to inept management and a rapacious union, GM and Chrysler had been shedding market share and jobs for decades before the credit crunch of 2008 brought the global economy to its knees. Despite rocky shores and rough waters, the managements of GM and Chrysler and their United Auto Workers partners never imagined they would have to pay the true cost of their failure to compete.
Read more: http://online.wsj.com/article/SB10001424052970204712904578090461206142072.html?mod=rss_opinion_main
Keying off the New York Times's headline for Mitt Romney's 2008 op-ed, "Let Detroit Go Bankrupt," President Obama has argued that the only alternative to his "bold" rescue of General Motors and Chrysler would have been a disorderly liquidation of the entire U.S. auto industry. Yet a close reading of Mr. Romney's op-ed reveals that his proposal was actually quite similar to the course of action the president took, right down to government funding of the bankruptcy reorganization process and warranty backstops.
So if the auto bailout is not simply the choice between government intervention and the collapse of an entire industry, what is the difference between the two candidates' positions?
When the president forced GM GM -0.99% and Chrysler into bankruptcy court, the White House's auto task force used the process to execute a prearranged reorganization it had masterminded with political allies. By contrast, Mr. Romney called for a true bankruptcy, in which creditors and stakeholders negotiate reorganization together, with the government merely providing the minimum support needed to prevent disorderly liquidation. In retrospect, Mr. Romney's approach not only would have produced outcomes superior to the president's, it was actually the braver course of action.
To understand why, it is necessary to examine GM and Chrysler's behavior in the weeks and months that preceded their bailouts. Thanks to inept management and a rapacious union, GM and Chrysler had been shedding market share and jobs for decades before the credit crunch of 2008 brought the global economy to its knees. Despite rocky shores and rough waters, the managements of GM and Chrysler and their United Auto Workers partners never imagined they would have to pay the true cost of their failure to compete.
Read more: http://online.wsj.com/article/SB10001424052970204712904578090461206142072.html?mod=rss_opinion_main
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