The failure to reach agreement on Capitol Hill may spell doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler potentially following close behind. While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.
After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009. The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.
Senate Majority Leader Harry Reid (D-NV) is quoted as saying, "We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line. It’s over with. I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight. This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight."
Speaking for the Senate Republicans, Sen. Mitch McConnell (R-KY) said, "We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves. The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work."
Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and 2 independents in favor.
There is still hope and the struggling automakers may get some money anyway.
CNN.com reports as part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations. One of the sources said that a White House official made it clear to a GOP senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.
Foreign automakers have been silent on the entire bailout plan. Toyota, Honda, Nissan and nearly all the other foreign companies that build vehicles in the United States have said little publicly concerning whether their American rivals should get the billions of dollars in emergency aid they have requested in recent weeks. To be sure, the companies themselves have little to gain by commenting on the bailout beyond expressing concern about the general health of the industry.
Asian stocks sank deep into negative territory and the dollar fell to a 13-year low against the Japanese yen on Friday following the collapse of a $14 billion bailout plan for the flailing U.S. auto industry. In Japan, the Nikkei 225 share average ended 5.6 percent lower during morning trading after it became clear that the negotiations to bailout Detroit automakers had failed in the Senate.
plez sez: much ado about nothing! the last act of the lame duck bush will be to bail out gm and chrysler... there is no way bush is going to let these guys falter before he hands over the reins to PRESIDENT-ELECT BARACK OBAMA on january 20th.
if necessary, the treasury will claw back some of the $700 billion wall street bailout money to keep detroit afloat for at least a few more months. and the bad thing is that this money will come with NO STRINGS ATTACHED! you can bet the gm ceo (wagoner) will hang around long enough to spend the windfall!
without a wholesale overhaul of their business practices, the detroit automakers are only prolonging the agony of their demise. plezWorld is convinced that at least one of the big three will fail within the next 12 months.
Read the New York Times article about how Asian markets sunk on news of bailout failure.
Read the New York Times article about the auto bailout failure in the Senate.
Read the New York Times article on the silence of the foreign automakers.
Read the CNN.com article about how Senate Republicans sunk the auto bailout.