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$14b auto bailout collapses in Senate

White House says it is weighing options

By Julie Hirschfeld Davis and Ken Thomas
Associated Press / December 12, 2008
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WASHINGTON - A $14 billion emergency bailout for US automakers collapsed in the Senate last 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 GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

"We were about three words away from a deal," said Senator 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.

Majority Leader Harry Reid said he hoped President 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.

Reid 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.

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

"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. Both Democratic senators from Massachusetts, Edward Kennedy and John Kerry, did not vote.

The implosion followed an unprecedented marathon 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.

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.

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Senator Chris Dodd, Democrat of Connecticut, the Banking Committee chairman who led talks on the deal.

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.

Aid for the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

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 in a bailout-fatigued postelection Congress, with Bush's influence at a low ebb.

Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and also 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 were already in revolt against Bush over an auto bailout deal the White House negotiated with congressional Democrats, passed by the House on Wednesday.

The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to the White House-backed rescue bill.

He and other Republicans said wages and benefits for employees of the Big Three should be renegotiated to bring them in line with those paid by Japanese carmakers 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 US 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.

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