Business News
Uncertain future for US car industry as bailout collapses (Roundup)
By Anindita Ramaswamy Dec 12, 2008, 9:40 GMT
General Motors World Headquarters in the Renaissance Center in Detroit, Michigan, USA. EPA/JEFF KOWALSKY
Washington - A last-ditch effort to pass an emergency loan that would resuscitate the ailing US car industry fell apart late Thursday after negotiations collapsed in the Senate, causing a wave of financial gloom to ripple through world markets on Friday.
After hours of bargaining, Republicans and Democrats failed to agree on a compromise deal. The bone of contention was the powerful United Auto Workers (UAW) union's refusal to agree to Republican demands for wage cuts and reduction in labour costs to the level of Japanese competitors operating in the US.
Republicans were insistent on wages and total labour costs of the Big Three Detroit car makers to reach parity by next year. While the UAW has agreed to reopen talks on labour contracts, Democrats would not accept the tough timetable.
'We have worked and worked and ... we're not going to get to the finish line,' Senate Majority Leader Harry Reid, a Democrat, said before the vote. 'That's just the way it is. There's too much difference between the two sides.'
The vote on ending the debate was 52 in favour and 35 against - falling far short of the 60 votes required to advance the legislation.
'It's over with. I dread looking at Wall Street tomorrow (Friday). It's not going to be a pleasant sight,' said Reid, later adding that there would be 'no more work' on the bailout until the 'reconvening of the new Congress next year.'
The fractured negotiations leave the fate of two of Detroit's Big Three carmakers, General Motors Corp and Chrysler LLC, uncertain.
Asian stocks tumbled Friday, and Honda Motor Co and Nissan Motor Co dropped more than 11 per cent over worries that the failure of GM and Chrysler would impact suppliers who also serve the Asian car industry. Denso Corp, the world's largest maker of car parts, plunged 10 per cent.
Stocks in Japan dropped sharply Friday, with the benchmark Nikkei 225 Stock Average closing down 484.68 points, or 5.56 per cent, at 8,235.87. The news also led to the largest drop in the dollar against the yen in 13 years, dealing a further blow to Japanese exporters.
Elsewhere in Asia, Hong Kong stocks fell almost 5.5 per cent while shares in mainland China's two stockmarkets plunged by nearly 4 per cent. In Taiwan, the TAIEX index fell 3.74 per cent and Singapore shed 3 per cent.
Markets in Europe were also falling in early trading Friday.
GM said it was 'deeply disappointed' that an agreement could not be reached in the Senate and that it would 'assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis.'
While GM and Chrysler have said they will not survive without federal aid, Ford Motor Co said it could manage without the funds. Ford still joined the bailout, fearing it would be in greater trouble if one of its competitors fails.
Reid said it was now up to President George W Bush to provide assistance to the carmakers from the already approved 700-billion- dollar bailout fund for the financial sector.
The Bush administration 'will evaluate our options in light of the breakdown in Congress,' White House spokesman Tony Fratto was quoted as saying by Bloomberg financial news agency.
The funds would have to come from the Treasury, as Federal Reserve chief Ben Bernanke expressed his reluctance earlier this week to use the central bank's emergency loan facility for the carmakers.
The mood in the Senate was emotional, tense and angry. 'Millions of Americans, not only the autoworkers, but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted,' said Reid. 'It's going to be a very, very bad Christmas for a lot of people.'
Democrat Christopher Dodd, who led the negotiations, said: 'More than saddened, I'm worried this evening about what we're doing with an iconic industry. In the midst of deeply troubling economic times we are going to add to that substantially.'
Reid accused Republicans of failing to act, as a result of which 'three million Americans are more likely ... to lose their jobs.'
He said, 'Republicans may think that rejecting this legislation sent a message to the auto industry. Instead, they sent a message to every single American that they are more interested in settling scores than solving problems.'
The House of Representatives had approved the 14-billion-dollar emergency loan Wednesday night, imposing strict oversight rules in exchange for keeping GM and Chrysler out of bankruptcy at least until April.
Earlier Thursday, president-elect Barack Obama called on Congress to support the loan. 'At this moment of great challenge for our economy, we cannot simply stand by and watch this industry collapse.'
The bill would have created a White House-appointed 'car czar' who would oversee the companies' restructuring and have the authority to revoke the loan by March 31 if not enough progress was being made.
Bush's administration backed the deal passed by the House, but the outgoing president had limited clout with his fellow-Republican legislators.
The carmakers argued an emergency 'bridge loan' was needed to weather the US recession, which has sent car sales to a 25-year-low in the past two months.
But many lawmakers blame the industry's struggles on a failure to streamline production and cut costs over the past decade as foreign competitors gained ground in the US market.
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Older Talkback
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Quoting the article:''After hours of bargaining, Republicans and Democrats failed to agree on a compromise deal. The bone of contention was the powerful United Auto Workers (UAW) union's refusal to agree to Republican demands for wage cuts and reduction in labour costs to the level of Japanese competitors operating in the US.''
This is inaccurate. The real bone of contention here is not the hourly wage, but the work rules that allow UAW members get paid for little or no work. Mister Gettlefinger's claim that the UAW is on 'third base while no one else has even entered the ballpark' , is not only a poor use of metaphor it is an outright lie. Bond holders are being asked to give up seventy-percent of what they are owed and were agreeable to taking that loss. Stockholders are taking the biggest bath in history.
Meanwhile, GM is already working on their 'Plan F'. They have hired lawyers with expertise in bankruptcy proceedings.
UAW concessions are important because the work rules problem goes well beyond the automakers themselves. The parts makers and a host of subcontractors are party to UAW contracts and are made uncompetitive thanks to the same or similar work rules.
The panic over this part of the sad saga unfolding before us is not justified. Mister No-hair-box-of-rocks will no doubt order his ghoul ruining our treasury to at least give GM a handout. The UAW will get its way. This right out of Atlas Shrugged. The head of the Union is dictating terms to the rest of the United States.
What did you expect? It is just the Republicant's doing what they do best...Ruining another part of the economy. I hope all the workers in the auto industry remembers how they were 'taken care of' by the Republicant's in the next election, then the Dem's will have 70 seats.
Pperfect,
Perfect example of how the United States came to be ruled by idiots.
At first leaders were leaders. They had vision and great integrity.
Now they pander to the lowest of the low ... the scared, uneducated and jobless (or soon to be) U.S. citizen that likes the 2nd Amendment and knows how to use a gun and how to vote with the big stick of his gun. It is a carrot and stick in reverse. The politicians pander to the lowest of the low because they are afraid of mommy and pissing someone off by having values and sticking to those values.
Bush, the valueless moron he is, panders to that kind and doles out as much bribe money as possible. Maybe someday we shall have a president with a little backbone, but I see such a person on the horizon.
*but I see such a person on the horizon.
should be:
but I see NO such a person on the horizon.
Of course. The U.S. is literally devoid of leadership. None to be found anywhere. No captains of industry not even in the best run companies. Intel, Exxon, whatever. Zero leadership. They are all withering giants that are getting older and older each day. Even the best run company is no more than a hype machine to attract consumer shoppers or get government pork barrel contracts.
I will pay you 5 pimp slaps to stop talking jibberish.
You are not qualified to shine the shoes of any republicans you claim to despise.
You armchair, leftist, knownothing.
Go immigrate somewhere and leave us here to work out the problems.
..yyyou should view how libnazi policies and lopsided union culture has gotten the auto companies to where they are now. Nothing, that has gotten the big three here is the Republican parties fault, but the dems have coddled the unions for decades and now they want your tax money to perpetuate this mess. Auto companies in America seem healthy, if their name is Toyota, or Honda.
This might be a surprise to you, but there are 49 other states who also have some real economic problems of their own, and, for some reason, none of these seem to matter, compared to the cherihed libnazi bastion the Auto Unions.
What your Republican party is doing is trying to stem what will be an open-ended commitment to subsidize runaway union culture and, ppperfect, I think that will benefit everyone, unless you think Christopher Dodd should do what he did for Fannie Mae, to teh auto industry.
No, bankruptcy and reorganization will benefit everyone, except libnazi poiliticians and Bolshevik union bosses.
The eventual collapse of the United States itself!!!!
Don't blame ' The Germans ' . What is it with you people and your blood thirsty hate ? You want to see others suffer , sick mother f-word's .
' There's one thing everyone agrees on: Daimler (Mercedes) screwed Chrysler royally.' ' Chrysler was the lowest-cost producer and the most profitable car company in the world ' ' it took Daimler less than a decade to drive Chrysler off a cliff '
i live in Michigan and you can't but a job here
thanks to Gov. Granholm.
Yes lets all pony up to ensure UAW workers continue to get their cushy 75 bucks an hour punching holes on an assembly line, while the rest of us unemployed live off scrapings from the Walmart parking lot.
Does anyone have an extra cardboard box I can sleep in tonight?
'Yes lets all pony up to ensure UAW workers continue to get their cushy 75 bucks an hour punching holes on an assembly line, while the rest of us unemployed live off scrapings from the Walmart parking lot.'
Interesting thought. So, this recession and potential depression is like no other because of the economic disparity. Billionaires get bailouts while those less fortunate eat scraps.
So, what are you going to do about it? Is there enough of you to make a movement? Or is the inequity built into the system to solidly for you to move or even comprehend?
You were shafted about 10 years ago and you are just beginning to comprehend the issue. Perhaps in 10 more years, when your kids are being punished in debt, you will try to do something. But for now, lay on your ass and enjoy the poverty.
...that Deroit is a national disgrace. Years of libnazi politics has produced the living nighmare of Detroit i.e runaway taxation, corruption, socialistic dreaming that is now culminating in the monumental mess you see.
Like partners in a sad dance, libnazi unions and libnazi political leadership have abandoned everyone but the faithful few, and are selling the highest offices in the land. Detroit? almost as bad as Chicago.
Would Sara Palin do this? Doubtful, but then again, she has more experience than the President-Elect.
My Honda was probably made in the USA and I have not had one problem with it in 7 years. My Ford is a piece of @#$%.
If you can't compete, you fold.
page: 1
lanceDec 12th, 2008 - 12:17:10
Finally, some Republican Senators are acting like republicans. What took them so long?
Why is Bush still ready with his pen ready to ink more debt? Answer: He is a credit-holic addict.
Fortunately, this time the Republican Senators acted like financially responsible people.
To bad the same Republican Senators act like credit-whores when they dole out debt to their banking friends. Notice how the main dispute was giving too much money to blue collar workers. This is true class warfare based on prejudice and bigotry. White collars get loads of dough, while blue collars get stiffed.
Republican v.s. Democrat, muslim v.s. christian, blue collar v.s. white collar to name just a few wars based on prejudice. The amount of prejudice in the United States is overwhelming.
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