Thread: Automaker bailout falls apart in Senate

Automaker bailout falls apart in Senate
Republicans torpedo House-passed measure
By Robert Schroeder, MarketWatch
Last update: 10:45 p.m. EST Dec. 11, 2008Comments: 743WASHINGTON (MarketWatch) -- A $14 billion bailout deal to aid the struggling Big Three automakers fell apart in the Senate on Thursday night, Senate Majority Leader Harry Reid, D-Nevada said.
"There's too much difference between the two sides," Reid said.
Senate Republican Leader Mitch McConnell of Kentucky said the sticking point was whether the United Autoworkers union was willing to agree to a parity pay structure as part of the deal to assist Ford Motor Co., (F:Ford Motor
and privately held Chrysler LLC.
It was unclear what the next step would be. The measure passed by the House of Representatives and sent to the House reportedly had the support of President Bush.
Senate Republicans earlier had made it clear they would block the House legislation.
Earlier in the day, McConnell, the Senate's top Republican, said he'd oppose the House-passed bill, making its passage unlikely in the Senate and Reid acknowledged a vote on it wouldn't pass.
"This proposal isn't nearly tough enough," he said. "It's pretty clear that there's no need to vote on the House measure, because it's pretty clear there aren't enough votes to pass that," Reid said.
Senators including Bob Corker, R-Tenn., and John Ensign, R-Nevada, were working on a plan that would give bondholders 30 cents on the dollar to help reduce the Big Three's debt load, bring wages into line with companies like Nissan (NSANY:nissan motors
and scrap union payments to workers still getting nearly full pay four years after retiring.
Acknowledging the opposition to the bill, Reid invited Republicans to offer their own version, but said Thursday morning that if no compromise can be reached, he'd bring a final vote to the floor Friday.
"We have danced this tune long enough," Reid said on the Senate floor Thursday.
The $14 billion loan package easily passed the House on Wednesday night, but its fate in the Senate was far less certain from the start. Democrats enjoy a slim 50-49 majority, and Reid said that the auto measure will need 60 votes to pass. Republican Sen. Richard Shelby of Alabama had threatened to filibuster the bill.
Uncertainty about the bill sent the stocks of Ford and GM down Thursday. Ford and GM ended about 10% lower at $2.90 and $4.12, respectively.
President-elect Barack Obama also repeated a call to aid the companies.
"I believe our government should provide short-term assistance to the auto industry to avoid a collapse, while holding the companies accountable and protecting taxpayers' interests," Obama said at a news conference in Chicago. "The legislation in Congress right now is an important step in that direction, and I am hopeful that a final agreement can be reached this week."
The bill passed by the House on Thursday would create a White House-chosen "car czar" for the auto industry, empowered to hold the companies accountable for developing long-term viability plans.
The car czar would be able to require immediate repayment of the loans if the companies don't make adequate progress by Feb. 15. Final restructuring plans would be due March 31.
The legislation also would stop shareholder dividends, along with "golden parachutes" and bonuses for executives. The government would also get warrants for nonvoting stock equal to 20% of the value of the loan it makes to each company.
The $14 billion is a long way from the $34 billion initially sought by the Big Three. Of the three companies, GM and Chrysler are in the greatest need of cash. Ford says it is seeking a long-term line of credit and doesn't need money in the short term.
Robert Schroeder is a reporter for MarketWatch in Washington.

WASHINGTON (AP) -- A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.



The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

The White House said it was evaluating its options in light of the breakdown.

"It's disappointing that Congress failed to act tonight," a White House statement said. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

The Senate rejected the bailout 52-35 on a procedural vote -- well short of the 60 required -- after the talks fell apart.

The implosion followed an unprecedented marathon negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Reid called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.

The stunning disintegration was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected in a bailout-fatigued postelection Congress, with Bush's influence at a low ebb.

Congressional Republicans were already in open revolt against Bush over an auto bailout deal the White House negotiated with congressional Democrats, passed by the House passed on Wednesday.

The momentum flagged even amid evidence of deepening economic meltdown. The government reported last week that the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

Hate to see what the market will be like tomorrow. I'm on the sidelines. Knew this was going to happen if they did not pass the bill through the senate. Lookout below!!! JMHO.

How long before they will reconsider the Auto bailout package ?