WASHINGTON Feb 14 Republican presidential candidate Mitt Romney called on the U.S. government on Tuesday to quickly sell its stake in General Motors, a move that could lock in about $14 billion in losses for U.S. taxpayers.
In an opinion piece in The Detroit News, Romney criticized Democratic President Barack Obama's $81 billion auto bailout in 2009 as "crony capitalism" that rewarded unions and other political allies of the president.
With Michigan's Feb. 28 presidential primary approaching, Romney is trying to explain why, in 2008, he called for the U.S. government to stand aside as auto companies at the brink of insolvency begged for help.
The industry plays a dominant role in Michigan's economy, and auto analysts say the government-led reorganization of GM and Chrysler LLC helped saved more than 1 million jobs and led to the rebirth of the two companies.
Obama, who will face the Republican presidential nominee in the Nov. 6 election, is highlighting the industry's turnaround as a success story in his efforts to create jobs in a devastated economy.
Romney, the son of a former auto executive, says the automakers would have recovered on their own. In his article on Tuesday, the former Massachusetts governor doubled down on his tough-love approach by saying the government should extricate itself from the industry as soon as possible.
"The Obama administration needs to act now to divest itself of its ownership position in GM," he wrote. "The shares need to be sold in a responsible fashion and the proceeds turned over to the nation's taxpayers."
Taxpayers have recovered roughly half of the government's $49.5 billion investment in GM through stock sales and loan repayments.
To break even on the GM bailout, the Treasury Department would have to sell its remaining one-third stake in the company for roughly $53 a share. GM stock is trading at about half that amount, so the government would lose about $14 billion on the deal if those shares were sold today.
Democrats said on Tuesday the government should wait to sell its stake when it can get a better price to minimize the eventual cost of the bailout.
"We have that duty not to sell it at a quick time to suit Governor Romney, but rather to do that which is best for the country, for the taxpayers and for the company," said U.S. Representative John Dingell, a Democrat who has represented southeastern Michigan since 1955.
Romney is not advocating a "fire sale" of GM stock that would hurt taxpayers further, a campaign aide said, but was pointing out that the government should not own stakes in private enterprises.
GM shares have lost more than 25 percent of their value since the reconstituted company offered its stock to the public in November 2010.
Financial analysts say GM will have to fix its money-losing European operations and address its underfunded pensions in order for the company's stock to rise.
WOULD OBAMA SELL?
Despite the potential losses, some financial and political analysts say Obama could be tempted to sell the government's stake in GM to conclude the bailout program before the November election.
The White House then could argue that any loss was money well spent when compared with the jobs saved.
"Part of (Obama's) campaign is going to be predicated on, his administration saved the auto industry," said Peter Nesvold, a Jefferies analyst who has a "hold" rating on the stock.
The White House declined to comment.
Romney needs a win in Michigan to recapture the momentum in the state-by-state nominating contest from rival Rick Santorum, a former Pennsylvania senator who has drawn even with Romney in national opinion polls after sweeping contests in Colorado, Minnesota and Missouri last week.
Romney's close ties to the auto industry and his own expertise as a former private equity executive who built a fortune by turning around troubled businesses could be complicating his prospects in Michigan.
Santorum and other Republican candidates also have opposed the auto bailout, but they lack Romney's long record of policy prescriptions on the subject.
During his failed presidential bid in 2008, Romney vowed during the Michigan primary campaign to work closely with the auto industry. After the November election, he penned an opinion piece calling on the government to allow GM and Chrysler to go through bankruptcy on their own.
Economists say that would have led to the liquidation of the two companies because they would have been unable to secure private funding to keep operating through bankruptcy, undermining the industry as a whole and threatening relatively healthy automakers such as Ford.
In Tuesday's opinion piece, Romney argued that Obama used the bailout to reward union allies at the expense of other stakeholders in the industry. The United Auto Workers, which backed Obama in 2008, made concessions on healthcare and future employee wages during the reorganization, but active workers did not take a pay cut.
"American taxpayers have been left on the hook for billions to benefit unions and the union bosses who contributed millions to Barack Obama's election campaign," Romney wrote.
Romney had to address the issue before rivals such as Santorum brought it up, according to political analysts who said Romney's union-bashing would go over well with Michigan Republicans.
"It's a fairly effective rebuttal to criticism that was coming his way," said Bill Ballinger, editor of the Inside Michigan Politics newsletter. "I would say it probably helps him in a Republican primary. In the general election, we'd have to see what happens."
Democrats have used the issue to repeat attacks on Romney that cast him as a heartless corporate raider who does not care that the bailout helped Michigan.
"He stabbed us in the back in our darkest hour, and we're not going to forget it," former Michigan Governor Jennifer Granholm said on a conference call on Tuesday. "And we're not going to let him forget it, either."