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$14B Auto Bailout Dies in Senate


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  • $14B Auto Bailout Dies in Senate

    WASHINGTON – A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.

    Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

    The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. 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.

    Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

    Majority Leader Harry Reid, D-Nev., 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."

    GM said in a statement it was "deeply disappointed" that the bipartisan agreement faltered. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said. Chrysler, too, said it "will continue to pursue a workable solution to help ensure the future viability of the company."

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

    "It's disappointing that Congress failed to act tonight," Deputy Press Secretary Tony Fratto said in a statement. "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."

    That bill — the product of a hard-fought negotiation between congressional Democrats and the Bush White House — was virtually dead on arrival in the Senate, where Republicans said it was too weak in its demands on the car companies and contained unacceptable environmental mandates for the Big Three.

    Thursday's implosion followed yet another set of marathon negotiations at the Capitol — this time involving labor, the auto industry and lawmakers. The group came close to agreement, but it stalled over the UAW's refusal to agree to the wage concessions.

    "We were about three words away from a deal," said Sen. Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts.

    The Senate rejected the bailout 52-35 on a procedural vote — well short of the 60 required — after the talks fell apart. Just 10 Republicans joined 40 Democrats and two independents in backing it. Three Democrats sided with 31 Republicans in opposition. Reid also voted "no" for procedural reasons.

    Congress is not scheduled to return for legislative work until early January.

    Some Senate Democrats joined Republicans in turning against the House-passed bill — despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

    "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 negotiations. The union had no immediate reaction to the bailout's defeat.

    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, with Congress now set to depart for the year.

    Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and urged the Bush administration and the Federal Reserve to provide short-term relief for the automakers. "That is the only viable option available at this time," she said.

    Congressional Republicans have been in open revolt against Bush over the auto bailout. Senate Minority Leader Mitch McConnell of Kentucky joined other GOP lawmakers Thursday in announcing his opposition to the White House-backed bill, which passed the House on Wednesday. He and other Republicans insisted that the carmakers restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda and Nissan in the United States.

    Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit 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. Toyota says its total costs 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.

    Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package, and the Senate dropped them from its plan.

    The House-passed bill would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would have been compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.

    The House approved its plan late Wednesday on a vote of 237-170.

    A pair of polls released Thursday indicated that the public is dubious about the rescue plan.

    Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.

    In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.

    Uh oh, lets see what Wall St. looks like at the end of the day.
    Want to start a website? I run Host Lonestar.
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  • #2
    I think that's okay. The auto makers should restructure under Chapter 11, dump the UAW contacts, and come back lean & mean...I guess, hell, I don't know. There simply is no evidence that the bail-out would work...and there is evidence that it would fail. The British government tried this once with one of their ailing auto makers. The auto maker still died and took a ton of tax payer money with it.
    ...hunter of the shadows is rising...


    • #3
      I know GM said if they got any money they would be selling all of their corporate jets...I think they should do it anyway. Unfortunately, for them to survive, they're probably going to be cutting LOTS of jobs. But, I still think their shares are going to go DOWN.
      Want to start a website? I run Host Lonestar.
      Texas Discussion blog about texas...forum as well


      • #4
        Anyone have any idea if this failed bailout means they'll be slashing prices on vehicles? I have a truck in sight that I wouldn't mind getting a darn good deal on, rather than paying the $19,500 they want for it.


        • #5
          Good for the Senate....to me the big story was it failed because the unions refused to budge on cutting wages. Let's see, lots of jobs with lower pay VS. no jobs at all? Yep, the union made the right choice.
          A Veteran is someone who at one point in their life wrote a blank check made payable to The United States of America, for an amount up to, and including their life. That is honor, and there are way too many people in this country today, who no longer understand that fact!


          • #6
            lol ray.

            Guams, I assume their going to have to do something along those lines, otherwise, they're not going to be able to stay in business. I hope GM manages to get through this, once I can afford it (about 2 years) I want to get a new truck as well. And I know exactly what I want, and its a Chevy. I don't want some stinking import truck. Everyone, support your local American vehicle company, BUY AMERICAN!
            Want to start a website? I run Host Lonestar.
            Texas Discussion blog about texas...forum as well


            • #7
              They couldn't back off of the salaries? Did they let the workers vote on that? We'll still need vehicles though so I guess things are looking up for Honda and Toyota. Maybe the union bigwigs can land a job on their assembly lines and deal with reality for a change.


              • #8
                Originally posted by ray8285 View Post
                Good for the Senate....to me the big story was it failed because the unions refused to budge on cutting wages. Let's see, lots of jobs with lower pay VS. no jobs at all? Yep, the union made the right choice.
                Whoa, I agree.

                I actually agree with the Republican lawmakers on this one. Message to UAW: Your company is going into the tank, and you want government tax dollars. What do you do? You need to do EVERYTHING POSSIBLE to acquiesce to their demands. Damn pride, your company's future hangs in the balance.

                If my company was struggling or on the heels of bankruptcy, and I was quite possibly about to lose my job, I think I would take a paycut (until I can find something better). This is almost about survival. Some of these communities have nothing but the auto industry. Why doesn't the union put this proposal before its members for a quick vote? They don't have time for negotiations. A paycut is better than unemployment. But maybe that's just me

                I'm all for unions, but this decision lacks common sense. Does the UAW really have the members best interests at heart? Do they really believe that the goose has an unlimited number of golden eggs remaining?

                A man should never be ashamed to own that he has been in the wrong, which is but saying... that he is wiser today than yesterday. Jonathan Swift 1667-1745

                It's only a conspiracy when your party is not in power.


                • #9
                  If we bail them out, who's next in line for Government money? The Airlines? I don't think we should bail them out. I'm sure if they did not have this option on the table, they would find ways to start saving their butts. I know it will get much worse before it gets better, I willing to bet some on this forum will be effected by layoff's, if not already.


                  • #10
                    Originally posted by LeanG View Post
                    I'm all for unions, but this decision lacks common sense.
                    I think they do more harm than good.
                    "When people show you who they are, believe them." - Maya Angelou


                    • #11
                      Unions built America, now they are destroying it.


                      • #12
                        Originally posted by LeanG View Post
                        Whoa, I agree.
                        This isn't the first time we've agreed, it's just very rare.

                        One caveat though, I would also demand the non-union personnel (EVERYONE) take an equal percentage pay cut. I think that would be fair. As for CEO, CFO etc...no more than 100k for the next two years, then we could reassess where the company was at.
                        A Veteran is someone who at one point in their life wrote a blank check made payable to The United States of America, for an amount up to, and including their life. That is honor, and there are way too many people in this country today, who no longer understand that fact!


                        • #13
                          Assuming 200 million tax paying citizens int he US (just wants a rough number that's int he ball park) that's $70.00 per taxpayer.

                          So, given the interest rates I get charged...How about every tax payer gets a $500 credit towards an American car, families get $1,000. You can sell or give yours away, you could buy an entire car with vouchers.

                          Either that, or cut every taxpayer some stock in each company.

                          Why does the government feel bankruptcy is OK for individual but not for the automakers?

                          These bailouts do nothing for the average tax paying citizen. Give the money to the individual taxpayers/families and let them spend money to reinvigorate the economy.
                          "We're not in this business for the money. We're not in it for the excitement, and moments like this. Duty, honor, country, service, truth, and justice are good. But you can do that from behind a desk. In the end, you carry a gun and shield out into the field for the sole purpose of confronting the bad guys. The enemy. There is no other reason to be on the front lines." ~Nelson Demille

                          If your story involves Peanut Butter and an animal - give up now!


                          • #14
                            Now .... if it will just STAY dead.
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                            • #15
                              For any who haven't seen this, Mitt Romney wrote a column about a potential auto industry bailout that was published in the NY Times. It kind of surprised me that he selected that particular venue to express his opinion, but his words make more sense to me than anything else I've heard on the subject. I'll also put his "street cred" on managing successful turnarounds (private industry, state government, 2002 Winter Olympics) up against anyone inside the Beltway.
                              IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

                              Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

                              I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

                              First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

                              That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

                              Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

                              The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

                              You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

                              The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

                              Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

                              Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

                              It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

                              But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

                              The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

                              In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

                              He strongly believes that the auto industry is vital to our nation, but he wants us to support it in a manner that will ensure viability.


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