UPSB v3
Serious Discussion / Bid to rescue ailing US automakers collapses
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Date: Fri, Dec 12 2008 13:01:31
WASHINGTON (AFP) - - A plan worth billions to rescue ailing US automakers collapsed in the US Senate, raising the prospect Friday of imminent bankruptcy for GM and Chrysler with millions of jobs at stake.
Last-ditch talks on the 14-billion-dollar package, backed by Democrats and the White House, broke down late Thursday after Senate Republicans insisted that union wages be brought swiftly in line with those paid by foreign automakers.
"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," Democratic Senate Majority Leader Harry Reid said.
News of the failed bid to broker emergency loans sent share prices tumbling in Asia and in early European trade. The dollar also fell sharply, hitting a
13-year low against the yen.
For GM and Chrysler, the last hope for a government lifeline rested with the White House, which has so far refused to draw on the 700-billion-dollar Wall Street bailout fund for the reeling car companies.
The financial bailout money "may be where they go next," said Republican Senator John Thune.
Reid called on President George W. Bush to reconsider his administration's opposition to dipping into the Wall Street rescue fund, known as the Troubled Asset Relief Program (TARP).
"I would hope that the president who has worked so well with us the past few weeks on this legislation would now consider using the TARP money to help the auto industry and the workers of this country."
Democrats initially pushed for a portion of the funds for the auto bailout but the Bush administration refused.
The White House , which suffered a stinging political defeat after backing the Democrats' proposal for the short-term auto rescue loans, did not say if it would relent on freeing up the financial bailout funds.
"It is disappointing that Congress failed to act tonight," White House spokesman Scott Stanzel told AFP.
"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," Stanzel said.
"We will evaluate our options in light of the breakdown in Congress."
GM , which has warned it could run out of cash within weeks, said in a statement it was "deeply disappointed" at the result.
Before the vote, the once mighty car company acknowledged that it was considering bankruptcy among other options and had hired a team of legal advisers.
Chrysler said it would "continue to pursue a workable solution to help ensure the future viability of the company."
GM and Chrysler are the most troubled of the iconic Big Three, with Ford in better financial shape but worried about the knock-on effects if their counterparts go down.
Along with Bush, president-elect Barack Obama had called on Congress to approve the bailout, citing the dangers of a "rippling effect" from the collapse of the companies.
Republican Senator Bob Corker, who spearheaded his party's alternative proposal, said the breakdown came over differences on employee compensation, and said that a union representative from the United Auto Workers was present for the talks.
"We are about three words -- three words -- away from a deal," he said.
Democrat Chris Dodd, chairman of the Senate banking committee, criticized Republican senators for pushing for steep wage cuts and warned the auto industry's fate was tied up with the wider economy.
"I'm deeply saddened. But more than saddened, I'm worried," Dodd said. "This will fail, we will go home, and I'm afraid our country will be in deeper and deeper trouble."
For workers in the industry, "this will not be a joyous season wondering whether or not their jobs, their livelihoods, their homes, their children's futures are at risk," he said.
The legislation would have provided GM and Chrysler bridge loans to operate until March 31, the date by which they must have crafted a restructuring plan that ensures their long-term survival while repaying government aid.
The bill also required the president to name a special designee, or "car czar," who would oversee the process.
Foes of the plan have said the automakers -- and not taxpayers -- must bear the burden of bad business decisions and declare bankruptcy.
As prospects for passage dimmed, US blue chips on Thursday tumbled 195.85 points (2.24 percent) to 8,565.57 at the closing bell while the Nasdaq fell 57.60 points (3.68 percent) to 1,507.88.
Quoted from
http://sg.news.yahoo.com/afp/20081212/tts-...cs-972e412.html
How do you think this will affect your family?
Im not living in the USA, but do you think this will cause the world to fall into greater global recession?
why didnt the bush administration approve this bailout plan? -
Date: Fri, Dec 12 2008 21:34:12
Congress won't approve of the bridge loans because GM and Chrysler have shown no signs of restructuring. As far as I know, they haven't even fired the management that has driven the companies into the ground. The CEOs arrived at the White house in private jets, so I think they just don't get it. Even though many jobs will be lost, failed companies should not be bailed out. Giving them more money won't solve anything. They need to tear everything down and start over again, or file for a Chapter 11 bankruptcy. At least Ford is trying to restructure without government assistance.
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Date: Sat, Dec 13 2008 10:05:41
The irony of the free market is that its "free" characteristic is also its most inherent flaw. Lack of regulation will always lead to economic failure. In this case, the US government is stepping in to stop the burgeoning landslide, which IMO is the way to go. Although proper restructuring will result in a proper foundation on which the future can be built, right now the economic climate is the state of fear. The US auto giants are too big to just let them collapse. By giving them loans, it injects not only capital but also confidence into the market as a whole, dampening the impact of the economic recession, and hopefully revive flagging consumer/investor confidence admist news of MNCs worldwide announcing major layoffs.
The US government should take over temporary management of the auto giants as part of the TOC of the loan, doing so can not only get rid of ineffective and extravagant CEOs, and in doing so able to piece together a coherent goal in which the sluggish US economic juggernaut can soldier towards to. -
Date: Sat, Dec 13 2008 14:48:45
I would have preffered a chapter 11 to a bailout of the auto-industry. It would had made it easier for the the auto company to discuss with the unions. But I can also see the problem with the word bankruptcy hurting their sales, and that is not something needed right now.
But bailout or bankruptcy the result would be the same, they have to close down a lot of plants, close down some brands and selloff some other brands. In the end it will result in the big three being somewhat smaller, which they have deserved to be. But then again we have to remember this is not all just brought on them because of poor management. The credit crisis have put automakers all around the world in a squeeze, the banks are still not make loans at the level they used to, and that pushes down sales. And then they have been drained for money in the first half of the year, because their usual low milage brands haven't sold. Some could say that it was their own fault, because they didn't have some more fuel efficient cars ready, but I will say it is also partly the fault of those in Washington, because have not had the balls to put some more tax on gasolin before, which have given a far bigger jump in gas prices procentage wise than in other western countries when the oil price started rising. If they just had put on some more tax the car manufactures would have been ready for the price shock.