US Auto Loan Package Dies in Senate After Being Passed in House

U.S. auto loan package dies in Senate

2008-12-12 12:10:49  

·The U.S. Senate rejected the loan package aimed at bailing out the auto industry. ·Democratic and Republic senators had failed to strike a bipartisan deal on the plan. ·They balked at giving the automakers loans unless their union agreed to cut wages next year.

    by Xinhua writers Liu Hong, Chen Gang & Tan Shusen

    WASHINGTON, Dec. 11 (Xinhua) -- A 14-billion-dollar loan package aimed at bailing out the American auto industry from bankruptcy officially died on Thursday night, as it was rejected by the U.S. 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.

This file photo shows new trucks are displayed for sale at a Ford dealership in Encinitas, California November 11, 2008. (Xinhua/Reuters Photo) Photo Gallery>>>

    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.

Factory employees are seen working in the plant of General Motors in the city of Silao, in the state of Guanajuato, Mexico in this November 25, 2008 file photo. (Xinhua/Reuters Photo) Photo Gallery>>>

    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 U.S. 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 U.S. economy," said Kevin Yan, a senior engineer with GM in Detroit, when reached by Xinhua on the phone.

    The auto industry helped the U.S. 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 700-billion-dollar 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.

U.S. House of Representatives approves auto bailout plan

2008-12-11 09:44:14  

·U.S. House of Representatives on Wednesday night approved a 14-bln-dollar auto bailout plan. ·The bill still needs to go to the Senate on Thursday for approval. ·Congressional Democrats and the White House reached a deal on the draft package.

    by Xinhua writer Liu Hong

    WASHINGTON, Dec. 10 (Xinhua) --

The U.S. House of Representatives on Wednesday night approved a 14-billion-dollar auto bailout plan to save the country's struggling auto industry from bankruptcy.

    The bill, which signifies the most extensive government intervention in the U.S. industry in years, still needs to go to the Senate on Thursday for approval. However, some Republican Senators have voiced strong opposition, leaving the bill's passing prospects quite uncertain.

    The bailout plan includes the extension of taxpayer-funded loans or lines of credit to the so-called Detroit Three, namely General Motors (GM) Corp., Ford Motor Co. and Chrysler LLC, and the appointment of a government "car czar" who will oversee the rescue package and a major auto industry restructuring aimed at innovation and commercial viability.

    Among the three auto giants, GM and Chrysler, which are in urgent need of short-term government loans to evade the imminent danger of bankruptcy, are expected to receive the money within days after the bill's passage. Ford, which said it currently has sufficient cash but wants to get a line of credit in case its finances worsen, will also become eligible for federal aid.

    The House approved the legislation 237-170, just hours after the Congressional Democrats and the White House reached a deal on the draft package following two days of painstaking negotiations.

    According to an earlier agreement reached last week between the Bush administration and the Congress, the rescue fund will be drawn from an existing 25-billion-dollar loan program meant to help the Detroit Three retool to make more fuel-efficient vehicles.

    Some analysts believe the bill will lay the groundwork for additional loans to the auto industry, which requested a total of 34 billion dollars in government help at Congressional hearings last week.

    However, a deadline of March 31 will be imposed on the carmakers to complete their restructuring plan and convince the government of their survival capabilities in the long run. If they failed to do so, the government "car czar" would have the power towithdraw the federal money and virtually push the companies into bankruptcy.

    House Speaker Nancy Pelosi said the legislation represented "tough love" for the American auto makers, and was "giving a chance-- this one more chance -- to this great industry."

    "We want to throw a lifeline for success. We do not intend to afford life support," she said.

    House Majority Leader Steny Hoyer said it was critical that the government bailout could proceed.

    "If we do nothing, we face the real threat that sometime soon there will be no American auto industry," he noted.

    The White House also called on the Republicans to endorse the bill. "We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs," White House spokeswoman Dana Perino said in a statement.

    Compared with the House vote which only requires a simple majority, the Senate voting will be much tougher, as 60 votes willbe needed to ensure the passage and the Democrats are holding the chamber only by 50-49. Analysts say the Democrats may need to get a dozen Republican Senators on board to secure the approval.

    "The ball is in the Senate Republicans' court," said Jim Manley,a spokesman for Senate Majority Leader Harry Reid. "There is no word yet whether they will give us consent."

    Some Republican Senators have vowed to block the deal. And Senator Mitch McConnell, the Republican leader, said Republicans will not allow taxpayers to subsidize failure.

    Republican Senator Richard Shelby on CNBC voiced his dislike for the auto bailout plan, calling it very "un-Republican." He said he would prefer to see the Detroit Three file for bankruptcy.

    Senator George V. Voinovich, a Republican from Ohio and a leading supporter of the emergency measure, warned that the deal doesn't have the necessary Republican votes to pass Congress.

    On Wednesday, the U.S. stock market opened higher on the positive progress for the auto bailout plan, as overnight media reports said that the White House and the Congressional Democrats already reached a "conceptual agreement" to put the plan to Congress vote.

    At the close of the trading, the Dow Jones industrial average rose 70.09, or 0.81 percent, to 8,761.42, and the Standard & Poor's 500 index rose 10.57, or 1.19 percent, to 899.24.

    According to estimates by the auto companies themselves, the rescue plan could help save more than 350,000 industry jobs and employment for millions of others.