Congress kills $14-billion US auto bailout

Partisan dispute over union wage cuts derails last-ditch effort to revive emergency aid before year's end.

Christopher Dodd 224.88 (photo credit: AP)
Christopher Dodd 224.88
(photo credit: AP)
A bailout-weary Congress killed a $14-billion package to help struggling US automakers after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end. Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused late Thursday to back federal aid for Detroit's beleaguered Big Three automakers. They wanted a guarantee that the United Auto Workers would agree by the end of next year to bring their pay into line with Japanese carmakers, something it refused to do before its current contract with the automakers expires in 2011. The breakdown left the fate of the auto industry - and the 3 million jobs it touches - in limbo at a time of growing economic turmoil. 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. Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for the emergency aid. Majority Leader Harry Reid, a Democrat, 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. Chrysler also said it "will continue to pursue a workable solution to help ensure the future viability of the company." The White House said it was evaluating its options in light of the breakdown. "It's disappointing that Congress failed to act tonight," Deputy Press Secretary Tony Fratto said in a statement. "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 talks fell apart. Just 10 Republicans joined 40 Democrats and two independents in backing it. Three Democrats sided with 31 Republicans in opposition. Reid also voted "no" for procedural reasons. Congress is not scheduled to return for legislative work until early January. Some Senate Democrats joined Republicans in turning against the House-passed bill despite increasingly urgent expressions of support from the White House and President-elect Barack Obama. "In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Democratic Sen. Chris Dodd, the Banking Committee chairman who led negotiations on the package. Alan Reuther, the union'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. 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, with Congress now set to depart for the year. Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and 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 have been in open revolt against Bush over the auto bailout. Senate Minority Leader Mitch McConnell of Kentucky joined other Republican lawmakers Thursday in announcing his opposition to the White House-backed bill, which passed the House of Representatives on Wednesday. He and other Republicans insisted that the carmakers restructure their debt and bring wages and benefits in line with those paid by 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. GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers. Republicans also bitterly opposed to tougher environmental rules carmakers would have to meet as part of the version of the House-passed rescue package, and the Senate dropped them from its plan. That bill would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would have been compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring. The House approved its plan late Wednesday on a vote of 237-170. A pair of polls released Thursday indicated that the public is dubious about the rescue plan. Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea. In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.