On Thursday night, the US Senate abandoned all efforts to fashion the passed House bill that would rescue General Motors (GM) and Chrysler (Ford claims it has enough cash to stay afloat). Senate Republicans refused to play ball and support a bill endorsed by the White House and Senate Democrats. 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.
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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.
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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.
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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.
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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.
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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.
~ ~ Citations ~ ~
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.
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4 comments:
I'm not a fan of the bail out plan either, but I certainly don't give the Republicans any credit for killing the it. They have their own agenda, like union busting, as always they are looking out for big corporations interest(Toyota,etc..) instead of the American people. Of course these corporations make huge donations at election time. They want the UAW to agree to a new contracts and accept lesser wages and even cutting the pension plans of auto workers who have busted their butts working for these companies. Can you imagine working 30yrs for a company and in your old age they adjust your pension whenever they re-negotiate the current employee contracts. I would have to echoe TUPAC, I ain't a killer but don't push me. How come these same Republicans didn't require the banking institutions to adjust their wages/pensions when they received some of that $700 billion bail out money?
the reason i give the senate republicans credit for killing the automakers' bailout bill is because they voted against bringing it up for a vote... thereby killing it.
i take no pleasure in watching this folly of american industry... i have numerous family members who have risen into the middle class because of the auto industry. BUT the auto industry has not adhered to some of the basic tenets of free enterprise (1) by letting the federal government engage in unfair free trade agreements that allow unfettered access to the consumer by foreign automakers, (2) by not adequately controlling wages of union workers and executives, (3) by making products that aren't competitive with foreign products.
the US automakers are to an extent hamstrung by the UAW, which by most accounts is the target of the senate republicans. with detroit being unable to negotiate UAW terms, the senate republicans will get their wish in breaking the most powerful union known to man.
when the smoke clears, we'll probably be minus one of the big three, the UAW will more than likely be a minor player, and the remaining automakers will have to trim the number of models available for the consumer... as i said in my post, i believe that we're looking at a market (or more than likely, an industry) correction that is long overdue.
The Republicans that killed the bill have their own motives. Funny how they claim they are practicing fiscal responsibility, when their states gave land to Foreign auto makers, built the facilities they are using, and got 3 billion dollars in tax payer money to set up operations in their states.
What corrections are you expecting from the auto industry when the dust clears? As I see it, it's only going to pave the way for the Foreign auto companies to take over and when they don't have a union to contend with the wages will significantly drop. They've already said as much in the media. I see how this benefits big corporations, but how will it help American workers rise/maintain middle class status? It only appears to widen the gap btwn the haves and have nots.
Additionally, the points that you made 1. It is the failure of the US Gov't that has fostered unfair trade policy by allowing Foreign companies unfettered access to US public; however, this is not the case when US companies export their goods to Foreign countries. Yet our gov't doesn't stand up for American companies to level the playing field. 2. If you look at the wages of american workers compared to Foreign worker wages they are relitively the same, infact the Foreign workers are actually making a little more as they don't pay for health care of their workers. Also, American executive wages are 50-75% more than american workers. While the Foreign executive wages are only 10-20% more than their workers. So there is unchecked greed on the part of American executives; however, I don't see any one asking them to re-negotiate their wages/adjust their pensions. 3. I agree 100% that american products have not been competitive with Foreign products. Hopefully, this crisis will adjust their mode of operation/ improve quality of their products.
I think we are going backwards and will pretty soon have the american workers back on the soup lines again. We can not compete with Foreign companies as they don't require the health care, don't have enviornmental standards(until they export to the US), and don't require minimum wages like the US. This is why the unions came about to stand up for workers, ensure they have a quality life, and strengthen our middle class, which made the US a strong country. No other country has a middle class like the US, but if we stand by and allow big corporations/politicians to bust unions than we are regressing. This is why I don't give politicians any credit, they are selling out americans to the highest bidder.
lady lavell,
you make some very good points... and i don't disagree with you. i like the idea of unions (my father was a union man) because of their role in creating the middle class for all americans, but i'm concerned that in their current state, they lack the effectiveness and pull that they once had (the demographics of the american work force has changed and not as many people work in union jobs). the power of the union has waned over the past 20 years and as the jobs they once covered continue to get shipped overseas, there won't be much for them to govern!
as far as the car manufacturers, they've supported a model that they cannot maintain! they make far too many different models which drive up the cost of production. GM needs to jettison several of those nameplates -- who needs Cadillac, Oldsmobile, Pontiac, Chevrolet, Saturn, and Buick (each with their own line of "me too" brands)?!?
i see a market correction where several (or most) of those brands go "belly up" leaving a leaner, more quality-driven product that is better able to compete with foreign brands.
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