Bailout Stand Trails Romney in Car Country

Government checks would not solve the car companies’ long-term problems, Mr. Romney wrote in an opinion article that he asked The New York Times to publish. The better path, he suggested, was a court-administered restructuring that would leave the companies with costs more in line with the global competition. The article carried the headline “Let Detroit Go Bankrupt,” which critics continue to use against him.

General Motors and Chrysler did eventually enter bankruptcy, and the headline was written by an editor, not by Mr. Romney. Yet more than three years later, the position he took still leaves many of his allies in the business world befuddled. It has also opened up an awkward distance between Mr. Romney and some top Republicans in his native state who insist that the $80 billion assistance plan completed by the Obama administration, expanding on steps taken by President George W. Bush, was the only viable path to save the carmakers from ruin.

But in that tumultuous moment — just after President Obama’s election but before he took office — Mr. Romney had both personal and political reasons to speak out.

He wrote of the experience of his father, George Romney, who as the head of American Motors had turned that company around, and he drew on his own experience as a private equity manager who had remade companies through bankruptcy. At a time when the bank bailout program that Congress passed six weeks earlier had left many on the right angry and concerned that the response to the financial crisis was undercutting free markets, Mr. Romney’s position was in sync with a desire among conservatives to draw the line against further government intervention.

Whether his opposition to the bailout plays as the kind of principled stand that Tea Party voters find reassuring or as an example of the cold, ruthless brand of capitalism that his opponents charge is responsible for his fortune will help determine how Mr. Romney fares in Michigan’s primary on Feb. 28 and likely beyond.

The Michigan Republican primary electorate is expected to be very conservative, defined at least as much by the kinds of conservatives who recoil at government bailouts and are suspicious of union power as it is by those with a more direct stake in the auto industry’s rebound.

“He gets attacked and mischaracterized for wanting to let Detroit die, and that’s not the case,” said Speaker Jase Bolger of the Michigan House, a Republican who represents a district near Battle Creek on the state’s conservative western side. He said Mr. Romney’s opposition to the auto rescue on principle could do the candidate more good than harm among primary voters.

“Autos are such an important part of Michigan’s heritage, but many people saw this as a government intervention that wasn’t going to cure the problem,” Mr. Bolger added.

The politics of the bailout and the industry’s comeback remain complex and not limited to Detroit. After the Michigan primary, the nominating contest moves into states where the automotive industry also has a significant presence: Alabama, Illinois, Mississippi, Ohio and Tennessee.

Some Republicans have criticized Mr. Romney’s insistence that federal intervention was wrongheaded as an example of what they see as his willingness to say anything to win over skeptical conservatives.

“He’s playing the same song as Rush Limbaugh and Glenn Beck,” said Bob Lutz, a former vice chairman for General Motors who said he was still so upset with Mr. Romney that he had cast his absentee ballot in Michigan for Rick Santorum.

“I think all of us in the auto industry who knew what the situation was were profoundly disappointed and, I would say, angry,” Mr. Lutz said. “We all saw it for what it was, which was a political ploy to the right.”

The Obama campaign sees a potential advantage and is moving to seize it. An Obama campaign official said allies will be dispatched across Michigan this week to hold news conferences raising Mr. Romney’s opposition to the auto company loans and attacking his economic policies as beneficial to the wealthy at the expense of the middle class.

Mr. Romney has defended his 2008 plan, most prominently in an opinion article last week for The Detroit News, as essentially a blueprint for the path that Detroit ended up taking. “The course I recommended was eventually followed,” he wrote.

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In Detroit, Santorum Defends Opposition to Auto Bailout

Mr. Santorum, who is locked in a tight Michigan primary race with Mr. Romney, argued in a speech to the Detroit Economic Club that Mr. Romney was inconsistent for supporting the Wall Street bailout known as the Troubled Asset Relief Program, or TARP, while objecting to billions of dollars in federal loans to the auto industry.

“Governor Romney supported the bailout of Wall Street and decided not to support the bailout of Detroit,” Mr. Santorum, a former Pennsylvania senator, said. “My feeling was that we should not support — the government should not be involved in bailouts, period. I think that’s a much more consistent position.”

In response, the Romney campaign said that Mr. Santorum had once defended a congressman who voted for TARP by saying the congressman’s vote was “the wrong decision, but I don’t think it was an unreasonable decision.”

A new Detroit News poll showed Mr. Santorum leading Mr. Romney by four percentage points in Michigan, which was within the poll’s margin of error. Mr. Romney needs a victory in the Feb. 28 primary to regain momentum after Mr. Santorum unexpectedly swept three contests on Feb. 7.

The battle for Michigan will soon be evident on the airwaves. On Thursday, a “super PAC” supporting Mr. Santorum reserved nearly $700,000 in television time for commercials that are to begin Friday. The group, the Red, White and Blue Fund, is stepping in where Mr. Santorum’s campaign has had a minimal presence, committing only $40,000 to advertising in Michigan.

But that increase in spending will not come close to matching the total number of advertisements supporting Mr. Romney. His campaign has reserved more than $800,000 in airtime, and the pro-Romney super PAC has spent more than $650,000 on television commercials in the state.

Both candidates, recognizing the political power of labor unions here, sought on Thursday to tone down some of their anti-union comments. Mr. Romney said during a visit to Monroe that unions play an “important role,” but defended so-called right-to-work laws. Mr. Santorum said during his address here that private-sector unions were a “legitimate” part of the economy.

But Mr. Santorum drew a distinction with public-employee unions, which he said had an unfair advantage because they bargain not with business owners representing shareholder interests, but with politicians trawling for votes and handling taxpayer money. “I have no problem with private-sector unions,” he said, adding, “I don’t feel quite as warm and fuzzy about public-sector unions.”

If either man wins the Republican nomination, his opposition to the auto industry bailout will be seen as a hurdle to winning Michigan, a critical swing state, in the general election. The auto bailout, which was begun during the Bush administration and continued by President Obama, is now widely seen as successful, and as if to emphasize that point to the candidates, General Motors on Thursday reported a quarterly profit of $472 million.

Mr. Santorum and Mr. Romney both say they favored a managed bankruptcy — which ultimately happened — but without the government loans. They argue that such a process would have allowed the companies to emerge at least as healthy, if not healthier, as they did from the bailout.

But many industry analysts say that the huge amounts of money required to save the companies was available only through the government; banks and other private sources of capital were too weakened by the economic crisis to provide loans on anywhere near the scale needed.

“These companies were hemorrhaging cash on a daily basis into the millions and millions of dollars; credit was not easily accessible from almost any of the markets, and so I don’t know that they would have survived,” said Gary Corbin, managing director of business development in Michigan for Accenture, the consulting firm. For every job lost at one of the big car companies, he said, 6 to 10 other jobs would have also been lost across the United States in a ripple effect.

“It was a huge catastrophe just about to happen,” he said.

In his speech, Mr. Santorum laid most of the blame for the bailouts not with Mr. Obama but with George W. Bush, a rare departure from the Republican candidates’ nonstop assault on Mr. Obama’s policies.

“President Obama was just following suit,” he said. “President Bush set the precedent, and it was the wrong precedent.”

Mr. Santorum also said that he favored income inequality because some people contribute more to society than others. While also emphasizing that he favors “equality of opportunity,” he added: “There is income inequality in America. There always has been and hopefully, and I do say that, there always will be. Why? Because people rise to different levels of success based on what they contribute to society and to the marketplace, and that’s as it should be.”

He also made light of the release on Wednesday night of his recent income tax returns, noting that he had paid roughly double the effective tax rate of Mr. Romney, who made far more money.

“Look, I do my own taxes,” Mr. Santorum said. “Heck, Romney paid half the tax rate I did, so obviously he doesn’t do his own taxes. Maybe I should hire an accountant in the future.”

Jeremy W. Peters contributed reporting from New York, and Ashley Parker from Monroe, Mich.

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Romney Defends Stance on Auto Bailout

The campaign’s new focus on Michigan, which will hold its Republican primary on Feb. 28, comes as new national polls, including a New York Times/CBS News survey, show Rick Santorum surging to a tie with Mr. Romney.

Mr. Romney’s new advertisement, called “Growing Up,” shows him driving a car and reminiscing about life in Detroit. He criticizes President Obama and concludes by saying: “I want to make Michigan stronger and better. Michigan’s been my home, and this is personal.”

The commercial is to begin running on Wednesday, according to a Republican who tracks media spending and who said the advertising cost a modest $178,000 on the NBC station in Detroit.

A “super PAC” backing Mr. Romney also began an advertisement in Michigan attacking Mr. Santorum for voting as a senator to raise the debt limit, to increase spending, to request earmarks and to let convicted felons vote. “Rick Santorum. Big Spender. Washington Insider,” proclaims the ad, from Restore Our Future.

Mr. Romney also sought to highlight his connections to Michigan in the opinion article published in The Detroit News on Tuesday, while also deflecting potential criticism about his opposition to federal loans to rescue the auto industry.

Noting that he was born in Detroit and that his father was president of the American Motors car company in the 1950s, Mr. Romney wrote that he was 7 years old when he got his “love of cars and chrome and fins and roaring motors” from his father.

But the main message of the piece was to defend an Op-Ed article Mr. Romney wrote just two weeks after the nation chose Barack Obama as president in 2008. Published in The New York Times, it had the simple headline “Let Detroit Go Bankrupt.”

Mr. Romney’s explanation is a complicated one, especially given the industry’s remarkable turnaround in the last three years.

Mr. Romney says he always favored what he calls a “managed bankruptcy” for the auto companies that would have allowed the businesses to restructure and emerge stronger than before. He criticized Mr. Obama for choosing what he called a “bailout” of the industry that benefited big labor unions.

But Mr. Romney next acknowledges that General Motors and Chrysler did in fact go through a “managed bankruptcy” at the urging of Mr. Obama’s administration — and he takes credit for being the one to have the idea first.

“Managed bankruptcy may sound like a death knell. But in fact, it is a way for a troubled company to restructure itself rapidly, entering and leaving the courtroom sometimes in weeks or months instead of years, and then returning to profitable operation,” Mr. Romney wrote in the piece. “The course I recommended was eventually followed.”

Officials in Mr. Obama’s administration, and many economists in both parties, scoff at Mr. Romney’s suggestion that a managed bankruptcy was possible without the billions of dollars in government aid to the car companies. They say Wall Street and private equity firms in early 2009 were in no position to lend the kind of money that the companies needed to manage the bankruptcy process in an orderly fashion.

They also point out a fact that Mr. Romney neglects to mention in Tuesday’s opinion article: that it was the Bush administration that made the initial loans to General Motors and Chrysler, starting the “bailouts” that Mr. Romney derides.

In a conference call with reporters on Tuesday, Jennifer M. Granholm, a former Democratic governor of Michigan, accused Mr. Romney of “stabbing us in the back” despite being from Michigan.

“I think he should say: ‘I’m sorry. The president was right,’ ” Ms. Granholm said. “Instead, he is justifying what he said, which turned out to be a terribly wrong piece of advice.”

Democrats also accuse Mr. Romney of trying to rewrite the history of his earlier positions.

In the first paragraph of his 2008 opinion article, Mr. Romney made an unmistakable prediction: “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.”

In fact, General Motors announced last month that it had earned $8 billion in profits in 2011 and had set a target of $10 billion in profits for 2012. Chrysler this month reported a profit of $225 million for the fourth quarter of 2011.

Mr. Romney now argues that the auto industry would be even better off if it had not received government money. And he accuses Mr. Obama of “crony capitalism” because the Chrysler bailout included provisions that gave the United Auto Workers an ownership stake in the company after it emerged from bankruptcy.

Mr. Romney called that an “$85 billion sweetheart deal disguised as a rescue plan” and argued that it was to benefit the unions, which were the president’s political supporters. He wrote that the federal government should “divest itself” of its remaining ownership position in General Motors and should turn the proceeds “over to the nation’s taxpayers.”

In fact, the restructuring of Chrysler during the bankruptcy process did involve agreements with the United Automobile Workers and the administration that led to a much smaller union, plant closings and a two-tier wage system that has helped to trim costs. The company also trimmed health care costs that had long been called an impediment to profitability.

Officials for Mr. Obama’s administration have long argued that such concessions from the unions were possible only because of the leverage the government wielded through the bailout and bankruptcy process.

Bill Vlasic contributed reporting from Detroit, and Jeremy W. Peters from New York.

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