“He [Romney] was willing to let Detroit go bankrupt.”
–Vice President Joe Biden
This statement is drawn from a headline–“Let Detroit Go Bankrupt”– on an opinion article written by Romney for The New York Times. But he did not say that in the article.
In the article, Romney argued that if the automakers “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.”
As Romney put it, “Detroit needs a turnaround, not a check.” In many ways, it was very much a business consultant’s approach to the problem—what earlier in the year he called a “work out.”
It is also important to note that although “bankrupt” often conjures up images of liquidation, Romney called for a “managed bankruptcy.” This is a process in which the company uses the bankruptcy code to discharge its debts, but emerges from the process a leaner, less leveraged company.
Ultimately, along with getting nearly $80 billion in loans and other assistance from the Bush and Obama administrations, GM and Chrysler did go through a managed bankruptcy. But many independent analysts have concluded that taking the approach recommended by Romney would not have worked in 2008, simply because the credit markets were so frozen that a bankruptcy was not a viable option.
PHOTOS: From the convention floor