Bailout dead, automakers in search of a lifeline
By KEN THOMAS and JULIE HIRSCHFELD DAVIS
Associated Press
December 12, 2008
WASHINGTON (AP) -- Their efforts in Congress squashed, U.S. automakers are depending upon a reluctant White House to quickly provide a multibillion lifeline to help them avoid imminent collapse.
General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks, have few options left after the dramatic defeat in the Senate of a $14 billion bailout for the domestic auto industry.
Its demise late Thursday prompted immediate calls from lawmakers in both parties for the Bush administration to tap into the $700 billion Wall Street bailout to rescue the beleaguered auto industry. The bill failed after talks broke down over the refusal of the United Auto Workers union to meet Republican demands for aggressive wage reductions.
The Senate rejected the bailout 52-35 on a procedural vote -- well short of the 60 required -- after the talks fell apart.
"I dread looking at Wall Street," said Senate Majority Leader Harry Reid in anticipation of Friday's stock market reaction. "It's not going to be a pleasant sight."
Stock markets in Asia and Europe dropped sharply on Friday after getting word of the bailout's failure.
The Bush administration has repeatedly said the Wall Street bailout fund should not be used for emergency aid to the automakers because it was designed to restore stability to the financial sector. Following the vote, the White House said it was studying its options.
"Plan B is the president," said Sen. Carl Levin, D-Mich. House Speaker Nancy Pelosi said action by President George W. Bush was the "only viable option."
General Motors and Chrysler are in the most immediate danger while Ford Motor Co. has said it does not need federal help now, but could face collateral damage if one of its domestic rivals fell. With the economy in recession, the auto industry has struggled under the weight of lackluster sales and choked credit markets.
Detroit's carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.
The White House said it was disappointed by the vote and the legislation "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."
Many congressional Republicans and some economists said the companies would be best to pursue a prearranged bankruptcy that would allow them to restructure quickly. But most Democrats and the carmakers rejected that, arguing it would quickly lead to liquidation because consumers would never buy cars from a bankrupt auto company.
As it lobbied unsuccessfully on Thursday, White House officials said the weak economy couldn't afford the collapse of the auto industry. President-elect Barack Obama said an industry shutdown would have a "devastating ripple effect" on the already battered economy.
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