This is a rush transcript from "Your World With Neil Cavuto," November 19, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Stocks down, as it looks like the prospects for a huge auto bailout are up — the industrials on the day down more than 427 points, their first trip, on a closing level, below 8000 since March of 2003. Back then, it was concerns about a slowing economy. Ditto today.

Bad economic news did not help. What some are calling a bridge loan to nowhere for the auto industry almost certainly hurt. Yet, today, Congressman Barney Frank saying that, if you are not for the bailout, you are not for blue-collar workers.


REP. BARNEY FRANK (D), MASSACHUSETTS: There's a double standard here. Aid to blue-collar employees is being judged by a standard different than white-collar employees.

I think the average AIG worker gets a good deal more than the autoworkers, probably not the clerical people, but the people at AIG.


CAVUTO: So, should lawmakers, now, be guilted into a bailout?

Former Republican presidential candidate Mitt Romney says absolutely not. He joins me right now.

On a day, Governor, we had this huge sell-off, do you think, partly on fears that Washington's out of control?

MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: Well, I think it's mostly on fears that the economy is out of control. And — and there's real reason for that.

Video: Watch Neil's interview with Mitt Romney

I think the — the key right now is to make sure that, with regards to the auto industry, we take advantage of a very difficult situation to make sure that we put the auto industry on such a stable footing, going forward, that we have an industry that's competitive, that's viable, that adds jobs in the future, that we don't have to be doing this again and again and again.

And I'm afraid, if we just write Detroit a check, without doing the kind of hard restructuring work that's necessary, why, we will just pay for ongoing loss of market share, unprofitability down the road, and more bailouts.

CAVUTO: All right, so, bailouts aren't the answer, but a bankruptcy filing could be? Could you explain?

ROMNEY: Well, the right — the right procedure, typically, for helping a country — excuse me — a company restructure is by either having a Chapter 11 bankruptcy, where you stay in the court's guidance, or you can that on an out-of-court settlement, where the parties come together and agree a restructuring. That would be preferable, of course.

It's a managed setting, where you say to the various participants that are part of the GM, or Ford, or Chrysler story, that they're all going to come together; they're going to reduce the burdens on the companies so they become more competitive with the transplants that have come here from overseas, or with the foreign imports, and that we have an auto industry that's competitive.

But, until we actually take out some of the costs, the excess labor costs, the legacy costs of retirees, the excess real estate costs — until we take those out, these companies are going to see ongoing years of more and more trouble.

CAVUTO: All right.

We should point out that this is something you have been espousing, even when you were a presidential candidate, when you were campaigning in Michigan. This is from earlier this year, I believe back in January, when you were discussing the auto industry's problems.

I think we have this quote. Do we, guys?


ROMNEY: I'm not open to a bailout. But I am open to a — open to a work-out. Washington should not be a benefactor, but it can and must be a partner.


CAVUTO: You still won there, with that tough-love approach. But Washington is not for tough love, right now. And I don't know whether it's this Congress, Governor, or — or the new one, but this bailout's going to happen. So, what does that mean?

ROMNEY: Well, you know, you have to hope that Congress is wise enough, here, to recognize that just throwing money at the auto industry is not going to help it long term.

And they're going to have to work with the industry as a partner to restructure the industry, to bring its costs down, to take the burdens off its back, so that the automobile companies can make automobiles that are effectively competitive with those coming from other nations. And, unless we do that, you're going to keep on seeing that domestic manufacturers lose share, year after year after year, and lose jobs.

I want to protect and grow jobs in the auto industry. And so, as the government prepares to put in billions of dollars to that industry, let's make sure that, as part of this effort, that we invest in companies that are newly streamlined, more economic, more efficient, and that we've really created a bright future for the American automobile sector.

CAVUTO: All right.

But many in that automobile sector — remind me, Governor — sure, you could be against bailouts, whatever you want to call them — they call them loans. But Europe's doing the same. Japan is doing the same, governments coming to the rescue of their industry, their auto industries — and that, just to compete, we have to do the same thing. What do you say?

ROMNEY: Well, you know, you look at what happened in Great Britain. Their auto industry was noncompetitive. The burdens were too great. The government said, "OK, we will give you some money to allow you to stay in business." But, over time, they lost more and more market share. Ultimately, the industry liquidated. British Leland is gone.

In our case, we should use this opportunity, not to walk away from the industry — I'm not suggesting that the federal government isn't a partner — but instead, as a partner, working with the industry to help them, either through a bankruptcy filing or through special legislation or through an out-of-court settlement, help them with their labor unions, their retirees, their suppliers, their real estate holdings.

Help them with all the parties involved to reduce the burdens on these companies on a permanent basis, so they can be competitive with the Japanese cars that are made here, the German cars that are made here. Look at what's happening in America. You have, right now, a number of foreign companies that have manufacturing facilities here, and they're making money and growing. We want to make sure that our companies that live here are also making money and growing. And there's no reason...

CAVUTO: But that's harder to do...


ROMNEY: ... they can't.

CAVUTO: I'm sorry, Governor. But that's harder to do in a recession, right? I mean, the history — and I know you know this for quite well from your Bain Capital days — but the history of companies that file for bankruptcy in a recession is not very good.

Usually, most of them fail outright. Those that fail, or go into bankruptcy, and the cuts by the slowdown, can come out of it. Continental comes to mind, as an example. So many of those auto guys tell me, "You know, Neil, bankruptcy is essentially the kiss of death. They don't buy cars when you are in bankruptcy because they assume you're done, you're toast. And in a slowdown like this, they certainly won't think much of your prospects." What you make of that?

ROMNEY: Well, there's no question but that the auto industry would far rather just get a check, and that goes from everybody from the UAW, to the suppliers, to the guys that are landlords, to the executives in the company. Just give us a check and trust us to do a good job with it.

And I'm going to say, you know, I am going to willing to help you out, but this is part of a restructuring and a work-out that makes you better long term, so I know that we get our money back, and I also know that we don't have to be putting dollar after dollar after this in the future.

And I think what that may require, for instance, is the federal government saying, you know what? If you buy an automobile made in the U.S. from now going forward here for the next couple of years, we're going to stand behind the warranties, so people don't have to worry about whether the warranty's going to be there.

CAVUTO: Well, what about the other notion here, that one of the Big Three does fail, maybe two of the Big Three fail, and, as tough and as hard luck as that is, we move on?

ROMNEY: Well, you know, I really don't think it is our best interest to see a complete liquidation of major players in the automobile industry. And I mean by that — closing plants, people going home. I want to save jobs. I want to see us grow. I don't think there is any reason why the domestic automobile manufacturing industry can't be competitive with that of companies that have come here from overseas, and produce cars here.

They can be as long as we take these extra burdens of their backs. That is what I want to do with the legislation that is going on. And I understand why some people in Washington, who get their orders from organized labor, don't want to have this discussion — saying to the UAW, Guess what? You're going to have to come to the table and reduce some of these benefits and change the...


CAVUTO: Or you can just merge, right? Your dad ran American Motors, and we ultimately know that, company went into the arms of Chrysler, that later went into the arms of Daimler-Benz, and then on its own again. My point is that markets have, if not a cold, but a very efficient means in handling this sort of thing. Do they not?

ROMNEY: Oh, they sure do, and that's precisely why I am saying, no to a bailout, yes to work-out.


ROMNEY: Work with the industry. There may be a merger in the future, perhaps. There may be a merger with a foreign company.

But the key is, get the burdens off the back of our competitors, so that we're able to — to compete on a global basis. And perhaps it requires bankruptcy, but, of course, we would all prefer an out-of-court settlement.

CAVUTO: Right.

ROMNEY: But that procedure allows us to streamline and become efficient long term.

CAVUTO: All right, Governor Romney, always a pleasure seeing you. Thank you very much.

ROMNEY: Thanks, Neil. Good to be with you.

CAVUTO: All right.


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