Mitt Romney and the Auto Industry: Predatory Profiteer

In 2008, as he is doing this year, Mitt Romney was in hot pursuit of the Republican Party's presidential nomination. In 2008, as he is doing this year, Romney was touting his experience as a businessman. And, in 2008, as he has already done this year, Romney was imploring voters to reject "lifetime politicians" who "have never run a corner store, let alone the largest enterprise in the world."

In January of that year, the Boston Globe reported that despite recent campaign pledges "to beleaguered auto workers in Michigan and textile workers in South Carolina to 'fight to save every job,'" Romney did not have a reputation as someone who fought to save jobs.

"Throughout his 15-year career at Bain Capital," the Boston Globe reported, "which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn't. His ultimate responsibility was to make money for Bain's investors, former partners said."

In June 2007, Eric A. Kris, a former Bain Capital partner, told the New York Times that "Mitt ran a private equity firm, not a cement company. He was not a businessman in the sense of running a company. He was a great presenter, a great spokesman and a great salesman."

I think we can all agree on at least one thing about Mitt Romney. He is proud to call himself a businessman, and, he is marketing himself to the American people as a businessman.

Is he a businessman concerned about creating jobs? Is he a businessman that you as a worker would be proud to be employed by? Is he a businessman whose business you'd like to see move into your neighborhood? Is he a businessman that creates jobs, or is he a businessman that has made a bundle of cash by dumping workers?

Just what kind of a businessman is Mitt Romney?

One could reasonably conclude that while he never really ran a corner store or even a traditional business, Romney's experience as a businessman has made him a master salesman who has become extraordinarily wealthy. At the same time Romney's work has cost thousands of workers their jobs, and, in some cases, left some stockholders holding worthless paper.

Romney's businessman's know-how shifted seamlessly into a finely honed knack for raising large sums of money for his political campaigns.

Dead wrong about the auto industry

A November 18, 2008, op-ed piece Romney wrote for the New York Times titled "Let Detroit Go Bankrupt" (http://www.nytimes.com/2008/11/19/opinion/19romney.html), may shed some light on his businessman judgment and credibility.

Romney led his piece with: "If General Motors, Ford and Chrysler 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."

Despite his vast businessman's experience, Mitt Romney was wrong.

Former Michigan Gov. Jennifer Granholm is more than willing to point out that President Barack Obama's decision to loan about $50 billion to General Motors and Chrysler to help them emerge from Chapter 11 bankruptcy was a very smart decision.

"Under his leadership, 1.4 million jobs supported by the U.S. auto industry would have been lost," Granholm wrote in a Politico opinion piece titled "Let Mitt Romney go bankrupt" (http://www.politico.com/news/stories/0611/56481.html).

Granholm continued: "That Romney is a native son of Michigan only makes his cold shoulder toward the auto industry in 2009, and his attempts to woo Detroit money today, even more shameful. His laissez-faire strategy toward our auto industry during its time of crisis was wrong from the start - and a clear indicator of the misguided leadership he would bring to the White House."

U.S. Rep. John Dingell, D-Dearborn, also issued a statement today criticizing Romney: "When Michigan families and communities needed his support, he threw them under the bus. ... [He] saw the debate over the rescue of the domestic auto industry and its workers as an opportune moment to earn some conservative credentials and abandoned those that needed, more than anything, sensible solutions to the crisis that the entire country faced. What's clear now is that if Mitt Romney had his way, Michigan families would be left out in the cold with no jobs, no income, and no industry."

Romney from Bloomfield Hills

Some Romney background: He is the son of George W. Romney (the former chief executive of American Motors and Governor of Michigan) and Lenore Romney. He was raised in Bloomfield Hills, Michigan, about 20 miles northwest of Detroit. Unlike Detroit, Bloomfield Hills is nowhere near being your average American city.

It consistently ranks as one of the wealthiest cities in the United States. In 2009, the estimated median household income was $114,269. It is not your basic Rainbow township: Whites make up more than 85% of the town's population, with 5% Asian, 4% Black, and 2% Hispanic. In other words, don't expect Governor Rick Snyder to assign an executor to take over Bloomfield Hills any time in the near future.

If you want to know more about Bloomfield Hills you can go to the Township's Official website (http://www.bloomfieldtwp.org/), or to Wikipedia (http://en.wikipedia.org/wiki/Bloomfield_Hills,_Michigan), or to city-data.com (http://www.city-data.com/city/Bloomfield-Hills-Michigan.html).

Romney, a Mormon, served as a missionary in France; graduated from Utah's Brigham Young University, and later earned joint Juris Doctor/Master of Business Administration degrees from Harvard Law School and Harvard Business School.

The Baron of Bain Capital

Romney worked at Bain & Company, eventually serving as its CEO. He was also co-founder and head of the spin-off company Bain Capital, a private equity investment firm, which did very well financially, providing Romney with the wherewithal to fund his later political campaigns.

In a piece titled "Romney's Fortunes Tied to Business Riches" (http://www.nytimes.com/2007/06/04/us/politics/04bain.html), the New York Times' David D. Kirkpatrick reported that Romney "made his money mainly through leveraged buyouts - essentially, mortgaging companies to take them over in the hope of reselling them at big profits in just a few years. It is a bare-knuckle form of investing that is in the spotlight because of the exploding profits of buyout giants like Bain, Blackstone and the Carlyle Group. In Washington, Congress is considering ending a legal quirk that lets fund managers escape much of the income tax on their earnings.

"'The amounts of money are so vast that it is truly a matter of time before the taxation of private equity is front and center of the public agenda," said James E. Post, a Boston University professor who teaches business-government relations. 'Increasingly, this world of private equity looks like a world of robber barons, and Romney comes out of that world.'"

Romney's businessman acumen and the modus operandi of the Boston, Mass.-based consulting firm Bain & Company was laid out in a June 26, 2007, Boston Globe piece titled "The Making of Mitt Romney" (http://www.massresistance.org/romney/ampad_062607/index.html):

"In 1992, Bain Capital acquired American Pad & Paper, or Ampad, from Mead Corp., embarking on a 'roll-up strategy' in which a firm buys up similar companies in the same industry in order to expand revenues and cut costs.

"Through Ampad, Bain bought several other office supply makers, borrowing heavily each time. By 1999, Ampad's debt reached nearly $400 million, up from $11 million in 1993, according to government filings.

"Sales grew, too - for a while. But by the late 1990s, foreign competition and increased buying power by superstores like Bain-funded Staples sliced Ampad's revenues.

"The result: Ampad couldn't pay its debts and plunged into bankruptcy. Workers lost jobs and stockholders were left with worthless shares.

"Bain Capital, however, made money - and lots of it. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million - in addition to fees for arranging the deal.

"Bain Capital took millions more out of Ampad by charging it $2 million a year in management fees, plus additional fees for each Ampad acquisition. In 1995 alone, Ampad paid Bain at least $7 million. The next year, when Ampad began selling shares on public stock exchanges, Bain Capital grabbed another $2 million fee for arranging the initial public offering - on top of the $45 million to $50 million Bain reaped by selling some of its shares.

"Bain Capital didn't escape Ampad's eventual bankruptcy unscathed. It held about one-third of Ampad's shares, which became worthless. But while as many as 185 workers near Buffalo lost jobs in a 1999 plant closing, Bain Capital and its investors ultimately made more than $100 million on the deal."

In the January 2007 New York Times piece Romney admitted that "Sometimes the medicine is a little bitter but it is necessary to save the life of the patient. My job was to try and make the enterprise successful, and in my view the best security a family can have is that the business they work for is strong." He explained that his experience running the Salt Lake City Olympics and as governor of Massachusetts would make him "take an even more sensitive look at the impact of business decisions on the lives of suppliers and employees and others who are involved."

Yet, when it came to assessing whether the U.S. auto industry should be saved - and along with it tens of thousands of jobs -- Romney came down on the wrong side of history. Clearly, he has some explaining to do. He should start by explaining why, with all his businessman expertise, he was so wrong about the auto industry!

ENDS

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