US auto loan package dies in Senate
12/12/2008 17:19
A US$14-billion loan package aimed at bailing out the American auto
industry from bankruptcy officially died last night, as it was rejected by
the US Senate despite the Wednesday approval by the House of
Representatives.
A procedural vote conducted in Senate ended up with only 52
yeas, formally strangling the legislation, whose passage needs 60 supporting
votes.
The fate was actually decided well ahead of the vote, as Democrat and
Republican senators, who hold 50 and 49 seats respectively, had failed to strike
a bipartisan deal on the rescue plan, designed specifically for the so-called
Detroit Three, namely General Motors (GM) Corp, Ford Motor Co and Chrysler
LLC.
Republicans left a closed-door meeting where they balked at giving the
automakers taxpayer-funded loans unless the powerful auto union agreed to cut
wages next year to the level of those hired by Japanese carmakers, the auto
Big-3's top competitors.
Republican Senator George V. Voinovich of Ohio, who
is a strong bailout supporter, revealed that the union refused to make the cuts
before 2011, as the auto workers' contract doesn't expire until then.
Senate
Majority Leader Harry Reid, who was quite optimistic about a Senate consensus
earlier in the day, said he was "terribly disappointed" at the failure of the
bill.
"I dread looking at Wall Street tomorrow," he said. "It's not going to
be a pleasant sight."
Stressing that the auto industry has a bearing on
millions of jobs in the country, Reid added: "Christmas is approaching ...This
will be a very very bad Christmas for many people."
GM and Chrysler, which
are under a severe strain of cash, have warned that they could be just weeks
away from collapse if there is no external assistance. Ford, which said it
currently has sufficient money on hand, also hopes to get a line of credit in
case its finances worsen.
The three companies employ nearly 250,000 people
directly, and 100,000 more jobs at parts suppliers could hang on their survival.
The companies also claim that one in every 10 US jobs are related to the auto
industry.
"A bankruptcy filing by a major automaker would be catastrophic, "
commented Craig Cather, president and CEO of CSM Worldwide, an automotive
forecasting and advisory service. "It won't be just a Detroit problem or a
Michigan problem."
"Many suppliers can't afford another major hit to their
production and cash flow. If they are forced to reorganize or possibly even
liquidate, that would start a ripple effect that would undermine the health and
stability of every automaker in North America," Cather told Xinhua.
And data
showed that 58 percent of GM's North American suppliers also supply Asian
automakers. The proportions among Chrysler and Ford suppliers are 59 percent and
65 percent, respectively.
"I think some senators have underestimated the
backbone role of the auto industry in the US economy," said Kevin Yan, a senior
engineer with GM in Detroit, when reached by Xinhua on the phone.
The auto
industry helped the US to create numerous middle class members in history, and
its collapse will be "disastrous," the 42-year-old added.
The White House,
which co-worked with the Congressional Democrats to produce the draft bailout
package and was actively engaged in Senate lobbying throughout Thursday,
immediately expressed regret over the bill's failure.
"It's disappointing
that Congress failed to act tonight," said White House spokesman Tony
Fratto.
Earlier in the day, White House spokeswoman Dana Perino warned that
the failure of this legislation would be "just something our economy can't
withstand at the moment."
According to Kevin Yan, the GM engineer, many of
his colleagues are hoping that Congress will work out a fresh bill that is
acceptable to both the House and the Senate.
On the unyielding attitude of
the union on the proposed wage cut, Yan said the union has its grounds because
it had made many compromises in the past. "But I think eventually they will
agree to cooperate. Because if there is no more auto industry, there will be no
more UAW (United Auto Workers union)."
But the Thursday Senate failure has
effectively killed any chance of Congressional action to save the automakers
within this year, as the lawmakers are going home for the holiday
recesses.
Analysts say that an expedient option now is for the Treasury
Department to use part of its US$700-billion financial rescue fund to help the
auto sector. However, the Bush administration has insisted that the 700 billion
is for the financial industry only and exclusively.
Xinhua
|
