Tuesday, May 8, 2012

Romney is no business genius on the auto bailout

In Ohio, Mitt Romney once again is trying to cover his tracks from the unpopular public positions he took opposing the auto industry bailout.  He is claiming he proposed the structured bankruptcy and Obama then copied him.  Consulting with  investment bankers I know, in order for it to be done as Romney proposed, there must be  Debtor in Possession Financing (DIP).  There must be capital to keep the enterprise running or else it just shuts down and lays off everyone and closes its gates and doors.  Some investors must get together, come up with the money, to make it work.  At that time there was no DIP . It was the worst part of the recession .Outfits like Romney’s Bain Capital did not rise to the occasion, either. 

The bailout (government stimulus) served as the DIP instead and made it possible for new management and the retention of GM to rise from the dead.  Romney’s approach would have left us trying to resurrect   an already long dead horse . Estimates at the time were unemployment figures of 10,000, if such a scenario would have happened, counting dealerships, parts suppliers  and their  manufacturers.  The auto sales battlefield  and ownership would have been left to the Japanese  and Koreans. 

While some dealerships closed, and the hiring is not yet up to the pre crash, GM is once again the largest auto manufacturer the world . The ownership is still in the hands of the  good ol’ USA.  As an investor friend of mine commented: “ The fact that Romney misses the point leads me to believe that he is no business genius as he claims to be.”

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