Romney: Bankruptcy, not bailouts, saved Detroit

Republican presidential candidate Mitt Romney said Friday the turnaround by Chrysler and General Motors was thanks to their being taken into bankruptcy court, not the bailout dollars that were given the automakers by the Bush and Obama administrations.

The former Massachusetts governor had written in a November 2008 New York Times Op-ed titled "Let Detroit Go Bankrupt," that automakers needed a managed bankruptcy, not a bailout check. "If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye," he wrote.

In 2009 Romney told Fox News that the U.S. government becoming a majority stakeholder in General Motors represented "a very, very sad circumstance for this country ... it's really tragic in a lot of respects."

Today, with the auto industry on the rebound - 115,000 jobs added, and $5.1 billion paid back to the federal government this week by Chrysler - Romney said Detroit's resurgence is because President Obama took his advice.

Schieffer: Romney must prove he's on the right

On CBS' "The Early Show" anchor Erica Hill asked Romney if he was wrong in the case of automakers who received government bailouts.

"I think you're misunderstanding the word 'bankrupt,'" Romney replied. "It's not liquidation of an enterprise, but allowing them to go to the bankruptcy court to reorganize and come out stronger. That's what happened.

"When I wrote that the auto industry was asking for a bailout, we are unwise to send billions of dollars [to companies], instead - finally - the president recognized I was right, and finally took the company, in the case at General Motors, the company finally went through bankruptcy and went through a managed bankruptcy, came out of bankruptcy and is now recovering.

"So, look, the right process for an enterprise in trouble is not to be given free money from the taxpayers with a bailout, but instead go through a bankruptcy process, reorganize debts, and reduce costs and come out stronger. "

"The company actually had to go through bankruptcy before that bailout?" Hill asked.

"Yeah, that's exactly what I said. The headline you read which said 'Let Detroit Go Bankrupt' points out that those companies needed to go through bankruptcy to shed those costs," Romney said. "And the federal government put in, I think, $17 billion into those companies before they finally recognized, 'Yeah, they need to go bankrupt, go through that process, so that they're able to get rid of excess costs.'"

[Last week a Romney spokesperson told The New York Times that the president's plan to save U.S. automakers was modeled after Romney's 2008 op-ed. "Mitt Romney had the idea first," said Eric Fehrnstrom. "You have to acknowledge that. He was advocating for a course of action that eventually the Obama administration adopted."]

CBS News' Erica Hill said to Romney, "You called the whole process 'tragic' and said it was 'a sad circumstance for the country.' Yet it's turned out fairly positive, a lot of folks would say, especially in Detroit."

"Erica, I think you're misunderstanding. What I wrote early on was absolutely right. I said these companies shouldn't be given money up-front by the federal government - like they were, by the way, both by President Bush and President Obama," Romney said. "Instead they should go through a bankruptcy process and if they did, they could come out stronger and well. And that's precisely what ultimately happened.

"So I'm very proud of the fact that, in fact, we called it like it was, and that is these companies needed to go through a bankruptcy process, come out through bankruptcy, go back to work, get jobs for the people who had would otherwise have lost jobs if these companies just trailed on down.

"And by the way, we could have saved billions of dollars had we moved to bankruptcy from the very beginning."

Also appearing on "The Early Show," Florida Democratic Congresswoman Debbie Wasserman Schultz said that Romney was engaging in "revisionist history."

She said the turnaround by Detroit was due to government bailout dollars and bankruptcy combined. "I think the auto industry executives would say they couldn't have gotten through to the other side and been profitable without both," Wasserman Schultz said, "so I'm not really sure what we need Gov. Romney for."

When asked by Hill why the former Massachusetts governor - who ran for but lost the GOP nomination in 2008 - is the right candidate for Republicans now, Romney said, "You know, back in 2008 the issue that really motivated our voters at the primary time was Iraq - whether the surge would work - and John McCain very wisely made that the centerpiece of his campaign. That was in his wheelhouse. He did a great job, but this year at this time the American people recognize that what's happening in the economy is the most important thing that America faces."

While voters told a CBS News poll in December 2007 that the war in Iraq was the most important issue (25 percent) compared to the economy (13 percent), those issues flipped in January 2008, in a poll taken just before the New Hampshire primary, with the economy the leading issue over Iraq, 23 percent to 22 percent. A February 3, 2008 CBS News poll released prior to Super Tuesday said voters called the economy and jobs the most important problem facing the country (38 percent) compared to the war in Iraq (21 percent).

  • David Morgan

    David Morgan is a senior editor at CBSNews.com and cbssundaymorning.com.

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