How Paul Ryan Solves Romney's Auto Bailout Problem

DETROIT ( TheStreet) -- Mitt Romney had a problem associated with opposing the auto industry bailout, which obviously succeeded. He may have solved it by selecting Paul Ryan as his vice presidential running mate.

Ryan, who comes from Janesville, Wis., a GM ( GM) town, backed the bailout. Specifically, he voted in December 2008, during the closing days of the Bush administration, to back a $14.5 billion loan to Chrysler and GM. The bill was opposed by most Republicans, including Romney, and died in the Senate, but Bush later authorized a $14 billion loan to the automakers from the Troubled Assets Relief Program.

"Romney had backed himself into a corner with uninformed statements about the auto bailout," said independent automotive analyst John Wolkonowicz. "So the choice of Ryan made lots of sense in that it diffuses the position Romney and the Republicans let their ideology back them into. I think (Ryan) is just what was needed to give Romney a fighting chance in the election."

Ryan "is a guy who understands the auto industry," said analyst Rebecca Lindland of IHS Automotive. "He lived in a town with a GM plant, and he would have grown up with the perspective that the auto industry is incredibly important to the fabric of the economy." This is how the auto industry sees itself, probably accurately.

Lindland noted that Ryan will likely appeal to auto workers, given his "combination of interests that Janesville people enjoy," including hunting and fishing as well as saving auto industry jobs.

The auto industry firmly believes, as Wolkonowicz said, that "the bailouts were essential to prevent a meltdown of the global auto industry and a consequent global depression.

"Had GM and Chrysler been allowed to go bankrupt, much of the global supplier community would have failed," he said. "This would have driven Ford ( F) into bankruptcy as well as other global auto companies."

The Janesville GM plant opened in 1919. Employment reached as high as 7,000 in 1970, but had fallen to 1,200 when the plant closed in December 2008. Ryan worked closely with state Sen. Tim Cullen, a Democrat who is also from Janesville, to convince GM not to close the plant, the Milwaukee Journal-Sentinel reported Saturday on its political blog. "Cullen said that Ryan was more focused on the ultimately failed goal to keep the plant alive than getting political credit," the newspaper said.

GM spokeswoman Katie McBride said the plant was placed on standby status when it closed "and will remain in this status for the foreseeable future. Future market conditions and our UAW-GM national agreement will dictate what happens to the plant going forward."

Ryan was one of 32 House Republicans to break with their party and support the bailout, Automotive News reported.

Subsequently, Ryan has offered various rationales for his support of the bill, as Automotive News detailed. In a 2008 statement, he said that the loan he backed would not use any tax dollars, and that "any assistance to the domestic auto industry should be drawn from previously approved funds from a U.S. Department of Energy loan package, rather than divert resources from the financial rescue package or rely on additional taxpayer dollars."

In a June 2010 interview with the Fox Business Network, Ryan said he wouldn't have backed the bailout if he had known the loans would come from TARP.

"The whole purpose of voting for that auto bill was to prevent the auto companies from getting TARP dollars," Ryan said. "What happened? It didn't get that money and President Bush, followed by President Obama, gave them TARP and now TARP has become this revolving government slush fund."

Although Romney is the son of the former president of American Motors, he does not generally share the views of people in the auto industry. Often it seems that the harsh realities of dysfunctional politics force Romney into a corner where he must oppose the Obama administration's policies at every turn, and oppose government involvement in the economy even when it is needed.

In 2008, in a now-famous column he wrote for The New York Times before Obama took office, Romney began by sayingL "If General Motors and Chrysler get the bailout that their chief executives asked for on Tuesday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed." The column was headlined "Let Detroit Go Bankrupt," and, as often happens; the headline is the best remembered part of the story.

In a June interview with The Detroit News, Romney seemed to back away from blanket opposition to the bailout, saying he would have been fine with the government bailing out the auto industry, but only after the embattled companies had gone through managed bankruptcy.

Now, with a bailout advocate by his side, Romney can back away even further.

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