Auto bailout dies in Senate
Republican opposition killed a $14-billion auto industry bailout plan in the Senate on Thursday night, putting the future of U.S. automakers in doubt and threatening to deliver another blow to the economy.
The measure died after a last-ditch effort by Senate Democratic leaders to strike a compromise that would have lured enough support to save the legislation, which was crafted in consultation with the White House.
The bill’s failure raises the possibility of bankruptcy by one or more of Detroit’s Big Three and puts new pressure on President Bush to authorize emergency loans for the automakers from the $700-billion Wall Street rescue fund, a step he has adamantly refused to take.
The collapse of General Motors, Chrysler or Ford -- along with many of their suppliers and dealers -- could throw hundreds of thousands more workers onto the growing unemployment rolls and further cloud the closing days of the Bush administration.
“We will leave here tonight to go home for the holiday recesses, but for the literally hundreds of thousands of people whose jobs depend on this industry, this will not be a joyous season, wondering whether or not their jobs, their livelihoods, their homes, their children’s futures are at risk,” said Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.).
White House spokesman Tony Fratto said the Bush administration was disappointed by the bill’s failure and left the door open to the president taking action to provide funding.
“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,” Fratto said. “We will evaluate our options in light of the breakdown in Congress.”
After the vote, GM issued a statement saying it was “deeply disappointed” that a deal could not be reached. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis,” spokesman Tony Cervone said.
Chrysler said in a statement that it was “obviously disappointed in what transpired in the Senate and will continue to pursue a workable solution to help ensure the future viability of the company.”
Ford had no immediate comment.
The bill would have provided emergency loans to GM and Chrysler and pressured them to restructure under a new monitor, or “car czar,” appointed by the president. The money would have been taken from an existing $25-billion fund intended to help automakers retool their factories to make more fuel-efficient cars.
GM has said it needs $4 billion by the end of the month and $6 billion more by March 31, implying it would have to file for bankruptcy protection without the money. Chrysler has said it needs $4 billion by March 31, with the same implications. Ford has said it does not need loans immediately but supports the aid to its competitors because they share a supplier network.
Shares of GM and Ford fell about 10% on Thursday as prospects for the bill looked dim. Chrysler is privately held.
Compromise talks in the Senate were led by Dodd and Sen. Bob Corker (R-Tenn.) and involved representatives of the companies and the United Auto Workers union. But attempts to craft a deal fell apart after Democrats would not agree to force the union to accept wages on par with U.S. employees of foreign automakers by a specific date.
In opposing that proposal, the UAW said it was prepared to do its part in the restructuring but not prepared to be treated unfairly.
“Unfortunately, Senate Republicans insisted that workers and retirees be singled out and treated differently from all other stakeholders,” said Alan Reuther, UAW legislative director. “This is what ultimately led to the breakdown of the negotiations.”
Senate Majority Leader Harry Reid (D-Nev.) said he feared the effect on the stock markets today.
“It’s not going to be pretty,” he said. “Millions of Americans, not only the autoworkers but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted and affected.”
Senate Democrats couldn’t bring the measure up for a vote without the support of at least 10 Republicans. Ultimately, they were seven votes short.
A group of conservative Republican senators strongly opposed any bailout, preferring that automakers restructure through Bankruptcy Court. The White House and Democrats fear such a development could scare consumers away from American cars and cause the collapse of the companies.
Bush personally lobbied recalcitrant Senate Republicans after Vice President Dick Cheney failed to round up support Wednesday during a contentious two-hour meeting.
“If we don’t do this, we will be known as the party of Herbert Hoover forever,” Cheney told them, according to a Senate Republican aide, evoking the president whose inaction is widely blamed for helping trigger the Great Depression in the early 1930s.
Senate Minority Leader Mitch McConnell (R-Ky.), who has 50,000 auto-related jobs in his state, said nearly all the Republicans opposed the bill “because we thought it frankly wouldn’t work.”
News reports surfaced late Thursday that GM had retained outside counsel and bankers to help it weigh a bankruptcy filing. Cervone said the company had already sought guidance on that issue, and Chief Executive Rick Wagoner had acknowledged as much in congressional testimony several weeks ago.
Reid and House Speaker Nancy Pelosi (D-San Francisco) had pushed the White House to use money from the $700-billion Troubled Asset Relief Program. Treasury Secretary Henry M. Paulson has said that the automakers were ineligible because the money was designated for financial institutions only.
Gene L. Dodaro, the nation’s acting comptroller general, testified last week that the president could use the TARP money for loans to the automakers. And President-elect Barack Obama could authorize money from the fund when he takes office Jan. 20 -- if GM and Chrysler could hold out that long.
Another option is for the Senate to try again to pass the legislation when the newly elected Congress convenes Jan. 6. There will be at least seven new Democratic senators at that point.
Times staff writer Ken Bensinger contributed to this report.