In 2000, a financially struggling plastics company that supplied car parts received emergency funding from auto manufacturers General Motors and Ford Co. The plastics company was owned by Bain Capital, the firm co-founded by Mitt Romney.
In other words, Romney, who has written against auto industry bailouts, profited via his involvement in Bain from a GM rescue of a car components supplier. Romney has recently come under fire from GM and Chrysler for airing dubious TV and radio spots suggesting the carmakers were shipping jobs to China.
Bain's management of Cambridge Industries was chronicled in a June story in The New York Times, which noted that Bain reaped over $10 million from the plastic manufacturer even as it went through bankruptcy, wiping out some of the other investors. According to a 2008 Detroit Free Press story, which is only available for purchase, Cambridge's bankruptcy meant more than 1,000 workers lost their jobs.
The full saga of Cambridge includes a political twist that The Times omitted: GM's decision to provide funding to its supplier as Bain managers let the company swing. According articles in the Detroit Free Press and Plastics News from 2000 accessed via Lexis Nexis, both GM and Ford gave unspecified financial aid to Cambridge. As GM and Ford supplied capital, Bain was extracting $950,000 a year in "advisory fees" from the ailing plastics company, according to The Times.
Romney claimed that he was on a paid leave from Bain in 2000 while he was running the Salt Lake City Olympics, but multiple government and company documents suggest otherwise. He held and continues to hold a financial stake in the firm.
Cambridge's cash infusion "is an indication that [GM] didn't feel like they had any good near-term switching opportunities" for the company to use other suppliers, Daniel Luria, an economist at the Michigan Manufacturing Technology Center, told HuffPost.
The relationship between parts suppliers and auto manufacturers is a close one, and GM exercises significant quality control oversight over the companies that provide it with windshield wiper arms, headlight covers, dashboards and dozens of other car components. Many working in the American auto industry are employed not specifically by GM, Ford and Chrysler, but by dozens of specialty suppliers that work with the carmakers.
"The biggest economic impact that bailing out GM and Chrysler had was in keeping the supply base from imploding," Luria said.
When a supplier shuts down suddenly, car companies can experience difficulty finding other firms to manufacture their parts, which can spark costly delays in production. Without the proper parts, GM can't get cars off the assembly line.
"Increasingly, automakers don't have multiple sources for particular parts," said Luria. "Having multiple suppliers so you could lean on them on price wasn't worth the price of duplicating the investment."
The tight relationship between suppliers and auto factories could be felt in Janesville, Wis., the hometown of Romney's running mate, Rep. Paul Ryan (R-Wis.). When the town's GM planted shuttered in the beginning of the recession, Eric Levitt, Janesville's city manager, said that he recalled several suppliers closing down as well.
John Beckord, president of Forward Janesville, a local business booster group, said the supply closures were typical. "Auto assembly plants will often have supply companies in close proximity, or some cases literally next door," he explained.
Beckord said the GM closure in Janesville had a "cascading effect."
"There were two very significant suppliers that also closed with the plant," Beckord said. One supplied seats for SUVs and another managed parts that came in from around the world, he said.
The 2000 Detroit Free Press articles do not specify how much funding the car companies offered to Cambridge in order to keep their supplier afloat. That same year, Cambridge was sold to Meridian Automotive Systems, Inc.
The Romney campaign declined to comment for this article.