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
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
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
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
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
"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."