General Motors and Chrysler

A contributing factor to Barack Obama's defeat of Mitt Romney on November 6, 2012 was a New York Times op-ed authored by Romney on November 18, 2008. General Motors and Chrysler were hemorrhaging money amidst the sharp economic downturn, attributable to both low demand for automobiles and an unsustainably high cost structure. If the automotive manufacturers closed down entirely, many suppliers (primarily located in the Midwest) would have suffered irreparably and be forced to shut down their own operations. Having read Romney's op-ed the morning of publication, his methodical outline of the situation was rooted in a unique perspective – his father actually ran a Detroit car company called American Motors.

http://www.nytimes.com/2008/11/19/opinion/19romney.html

The New York Times editorial staff’s headline associated with Romney’s op-ed, “Let Detroit Go Bankrupt,” ended up resonating very poorly among some of the 2012 electorate because of the negative connotations associated with bankruptcy.  In debates and on the campaign trail (particularly Ohio and Wisconsin), President Obama repeatedly accused Romney of wanting to let Detroit go bankrupt.  This charge was not effectively countered by the Romney campaign, and losing Ohio sealed his fate on Election Day.

In this context, it may be surprising that the actual content of Romney's fateful piece is in fact quite moderate and business oriented, rather than politically oriented. He addressed failures of management, GM and Chrysler's lack of product competitiveness amidst high gasoline prices, and how labor unions had extracted untenable wages, benefits, and pensions during the good industry years of the early 2000s.

Crucially, Romney became the first major public figure to propose a long-term solution other than just throwing money at the problem, and some of his proposals were indeed incorporated by the Obama Administration in early 2009. The government would oversee a pre-packaged bankruptcy process, where the companies could avoid liquidating all their assets, and customer warranty agreements would be protected.

A critical difference emerged, however, between Romney's proposal and what the Obama Administration implemented. The next article below discusses this difference, centered on the companies' creditors. While the bankruptcy process may not seem like an incredibly compelling topic, the consequences of these 2009 actions are far-reaching, and almost certainly affected you as taxpayers or your family members as investors and/or pensioners.

Source: http://kids.britannica.com/comptons/art-54773/Detroit-Michigan