WASHINGTON — A $14 billion emergency bailout for U.S. automakers collapsed in the Senate on Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.
The collapse came after bipartisan talks on the auto rescue broke down over Republican demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.
Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. 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.
The White House said it was evaluating its options.
“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 an unprecedented marathon of 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 widespread economic turmoil.
Deal was close
The group came close to agreement, but it stalled over the UAW’s refusal to agree to wage cuts before their 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,” and added, “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. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.
Alan Reuther, the UAW’s legislative director, declined to comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.
Efforts to stitch together a rescue package for the automakers gained urgency last week when the government reported the economy had lost more than half a million jobs in November, the most in any month for more than 30 years.
“There’s a lot of hardship out there. People are losing their jobs, losing their homes, losing their cars and losing their patience,” said Reid, D-Nev. “We don’t need to pile on.”
It was unclear how far the participants were willing to go to seal the federal aid that General Motors and Chrysler said was essential to keep them from bankruptcy.
Supporters had an uphill battle pressing the rescue package on a bailout-fatigued Congress.
A pair of polls released Thursday indicated that the public is equally 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. Forty-five percent of Democrats and 31 percent of Republicans backed the idea. In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.
Future is tenuous
Meanwhile, the chances that General Motors and Chrysler will be insolvent by year’s end are growing rapidly.
The companies have been warning for some time that they would run out of money, but crushing bills from their suppliers are coming due. General Motors and Chrysler, for example, owe their suppliers a total of roughly $10 billion for parts that have been delivered.
GM has held off paying them for weeks, and Chrysler is paying in small increments. But the cash shortages at GM and Chrysler are getting more severe, according to their top executives and other officials.
GM has said its cash reserves are falling by more than $2 billion a month, and the company has hired bankruptcy advisers.Chrysler is a private company, but its sales are falling faster than any other company in the industry, and it has acknowledged it will run out of money soon, too. Many of their suppliers are teetering on the verge of bankruptcy themselves and cannot extend credit much longer.
When suppliers big and small start failing, the flow of parts to every automaker in the country will be disrupted because suppliers typically sell their products to both American and foreign brands with plants in the United States.
“There’s no question it will hit Toyota, Honda and Nissan too,” said John Casesa, principal in the auto consulting firm Casesa Shapiro Group.
“Many of the small suppliers will simply liquidate because they don’t have the resources to go reorganize in Chapter 11 bankruptcy,” Casesa said. “They’ll just go away.”
The New York Times contributed to this report.
