Skip to content
Link copied to clipboard

Bailout proposal collapses in Senate

Worker wages and benefits tripped up the tentative deal to assist the auto industry.

Sen. Christopher Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, left, with other members of Congress after the Senate's rejection of an automaker bailout proposal. (APi)
Sen. Christopher Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, left, with other members of Congress after the Senate's rejection of an automaker bailout proposal. (APi)Read more

WASHINGTON - A $14 billion emergency bailout for U.S. automakers collapsed in the Senate last night after the United Auto Workers union 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 union agree to steep cuts in worker compensation by 2009 to bring their pay into line with Japanese carmakers.

Majority Leader Harry Reid said he hoped President Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler L.L.C. 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 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 economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before the 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. Christopher J. Dodd (D., Conn.), the Banking Committee chairman who led negotiations on the package.

Sen. Arlen Specter (R., Pa.), speaking after the talks broke down, cited the "potential devastating impact" to the nation's economy if a bailout is not approved.

He urged lawmakers to try again, saying: "We pride ourselves on being the world's greatest deliberative body. Well, why not deliberate?"

Alan Reuther, the UAW's legislative director, declined comment 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 was not immediately clear 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 Wednesday.

Efforts to stitch together a rescue package for the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month in more than 30 years.

General Motors and Chrysler said the federal aid was essential to keep them from bankruptcy. Ford is in somewhat better financial shape than its rivals.

Chrysler's chief financial officer said last night in an interview that the company was nearing the minimum level of cash it needs to run the company and would have trouble paying bills after the first of the year.

In the interview, vice chairman Tom LaSorda and chief financial officer Ron Kolka also said some parts suppliers and other vendors have demanded cash on delivery but the company is fending them off.

Chrysler has said its cash will drop to $2.5 billion by Dec. 31, the minimum needed to meet payroll, pay suppliers, and run the company. With the U.S. sales slump expected to continue into January, one of the slowest sales months of the year, the company has little revenue coming in and must pay suppliers $7 billion every 45 days, Kolka said.

Comparing Costs At GM and Toyota

Hourly wages

for United Auto Workers laborers

at General Motors Corp. factories are almost equal to those paid by Toyota Motor Corp. at its older U.S. factories.

GM says the average

UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour.

The difference

is in benefits, with the unionized factories having far higher costs.

GM says its total

hourly labor costs are now

$69, including wages, pensions and health care for active workers, plus the pension and health-care costs of more than 432,000 retirees and spouses.

Total costs

for Toyota

are around $48. The Japanese automaker has far fewer retirees, and its pension and health-care benefits are not as rich as those paid to UAW workers.

- Associated Press