Former Massachusetts Gov. Mitt Romney said President Obama is finally showing some "backbone" when dealing with the automakers, endorsing the White House's new call for GM and Chrysler to restructure, or face compulsory bankruptcy proceedings.
"A lot of people expected the president just to cave and write a big check and hope for the better," said Romney, a 2012 Republican presidential front-runner, in an interview today with CNN.
"I'm glad he's expressing some backbone on this, saying that: 'You guys need to get your house in order or you are gone. You are going to go to bankruptcy.' That's something that needed to be said months ago."
Romney, former CEO of Bain & Co., a leading management consulting firm, said that bankruptcy or a "bankruptcy-like process" is what will help turn Detroit turn around financially.
"It's clear that just writing checks is not the answer," said Romney.
"It really keeps the bondholders and the UAW and the other stakeholders from taking the necessary haircuts that allow these companies to be competitive."
If the unions won't agree to a voluntary bankruptcy, Romney recommends a forcible bankruptcy.
"You going to have to have that kind of a club to get these companies to be able to restructure their excessive costs," said Romney.
"A number of folks, myself included, last November, said just don't write checks. You're sealing the fate of these companies unless you help them restructure and give confidence to the American people that they're going to be here forever.
"If you don't do that, just putting $17 billion into them is just going to be wasted, and also, ultimately, seal their fate."
GM bondholders now wonder if they’ll be offered that haircut in the form of “pennies on the dollar" for their $28 billion in outstanding debt under a revised survival plan.
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