Auto bailout package fails in Senate

A federal assistance package to forestall a deeper financial crisis at U.S. auto giants ran out of gas in the Senate late on Thursday, giving the stock market a downward shock.

After passing the House and getting White House agreement, the Senate failed to get the 60 necessary votes to continue debate on the auto rescue bill.

General Motors and Chrysler, which have said they need billions of dollars in federal aid to continue operations, released statements saying they were disappointed with the Senate's vote. Ford lobbied for the aid because it said it would suffer damage from the failure of the other large manufacturers or suppliers. All are suffering from a sharp drop in sales.

Automakers are expected to lobby the White House to tap the Troubled Asset Relief Program (TARP) emergency aid, which was established to shore up U.S. financial institutions.

The talks in the Senate broke down at the last minute over Republican Senators' insistence to have labor rates put on "parity pay" with non-labor employees at foreign car makers, according to reports.

"We are about three words away from a deal," said Senator Bob Corker, who had proposed that wages be brought in line in 2009.

Impact on tech investment?
Apart from questions over the size of the loans and oversight, U.S. automakers were expected to invest in technologies to improve fuel efficiency, such as plug-in electric cars.

In its business plan presented to Congress, GM pledged to "substantially change its product mix over the next four years, and launch predominately high-mileage, energy-efficient cars and crossovers."

It also said that GM's car fleet efficiency would be 37.3 miles per gallon by 2012--apparently higher than the mandated standards--and would invest heavily in electric car powertrains.

Similarly, Ford said that it would accelerate delivery of a line of battery-powered cars.

The failure of the deal now raises the possibility of financial breakdown at GM and Chrysler, which have said that they need "bridge loans" to get through the end of the year.

Public opinion, meanwhile, shows wariness of any financial assistance to the auto companies. A poll from the nonpartisan Pew Research Center found that only 39 percent of people surveyed said that it would be right to spend billions to keep the Big Three in business, according to news reports.

Some economist have argued that allowing the auto companies to collapse would cause far greater economic damage than the size of the bailout.

[sparrowhyperion]

What the heck are these people in Congress smoking?? Are they TRYING to totally wreck the economy. Where I live it's been bad enough with the big three laying off workers. If they go under, then the whole city will dry up like an old ghost town. They should add congressman to the definition of Stupid in the dictionary.

[timber2005]

Its easy to look at it and say "hey, they need money... the government has money... give them money, they won't go out of business". But having sat through an microeconomics class this semester, and teachers being able to point out reasons for all these things in support and opposition, you have to realise there is more than just the need of money here.

Businesses go out of business because they can no longer "allocate their resources efficiently". The produced well above demand, they merged and merged until there were few competetors, and now when people have less money to spend, they suffer. Their products are luxuries... they have elastic demand.

So lets say we give 'em the, what, 12 BILLION dollars they need. Although I think it's a better risk than the alternative, what kind of message are we sending? "Ok, continue by your long run ethics, we will bail you out when things look tight"?

My economics teacher told us a story this week. I think it was a Crysler plant... was the least efficient, least producting plant in the U.S. they offered it to Toyota, giving them all the resources that were used... all the equipment and staff, not taking one thing away. Toyota in a year turned it into the HIGHEST yeild plant in the U.S.

I'm not all for letting all of our homeland producers die, but they really need to show willingness to change, and start following the rules of economics to suceed. Produce at the most efficient level. Start putting money aside for a rainy year. Start paying in line with the industry. (New hires were getting $24/hr...).

At least these companies are willing to fight and prove that they really need it, over the banking industry.

[rapier1]

Something to keep in perspective... the automotive sector powers around 1/3rd of the US economy. A major automotive manufacturer going out of business would create huge ripple effects being that a other manufacturers are usually tied into some aspect of their parts/distribution chain. Likewise, a lot of dealers market several manufacturers at the same time. Then you have the mechanics who can't get parts, the part stores that have no inventory, etc etc etc. If GM goes out of business suddenly these businesses have lost a large fraction of their inventory and market. Long term the market will recover but in the short term it would be a major disruption. This disruption could be weathered in good economic times but right now it would exacerbate the existing weakness. Not something you really want to let happen.

[mltrafton]

What is wrong with everyone?

How people are able to buys cars? Do they not go out and get a loan. Guess what it is very difficult to get a loan. What is the result of this inability to get a loan? Cars are not purchased. Hence the problem you are seeing today. We are not talking about an item you can put on most peoples credit card here this is a $15-$30k dollar investment. If it were not for the credit mess created in part by the congress allowing people to purchase homes that everyone knew they could not afford credit would be available to purchase cars.

Michael L. Trafton
Orion Twp, MI

[WorkinghardinCanada]

Quite frankly I am tired of hearing about the US auto manufacturers and the help they need from the taxpayers. All those people in positions of "power" that have made poor decisions over the years to come to this result, and who pays? Not only is the US economy affected by mismanagement, but the effects are felt by those in Canada as well -- thank you USA. Maybe what the auto industry needs is the Japanese to show them how its done. Let the companies file Chapter 11, get those pot smoking button pushers from the union the heck out of there, and get some people who have some respect for their fellow citizens working to fix these issues!

[Lerianis]

Excuse me, but the Union is not the problem, and you should be SMACKED for even intimating that they are. The unions are the ONLY reason why the American worker has a good wage (mostly, there are still those who are being taken advantage of by Walmart and others), vacation time, sick time, etc.

The real problem is that the United States automotive industry for MANY MANY MANY MANY (repeat that capitalized word 50 times to get the message!) years have been focusing on SUV's and trucks, to the detriment of this country. Also, they haven't been making very good cars AT ALL in the United States, judging from my mother's Eagle that she had and was a LEMON X infinity from day one.

[Lakebook]

Why we have to bail out bad management and workers who make in average $77/hour?why? The deal is off because unions don?t want to cut wages. The Japanese manufacturer workers in US make $44/hour and they don?t ask for bail outs!

[supoman]

I agree that American auto workers need to take a pay cut. Just like those of us in IT had to do when the DOT COM bubble burst. But those calling on them to declare bankruptcy are just wrong. You need to factor in all of the companies downstream that would suffer from bankruptcy: suppliers, dealers, recylers, steel, plastic, sheet metal, electronics. Have brains enough to not throw all those folks down the drain to punish the Big 3. In addition Ford is already a couple of years into doing what it need to do to compete. They killed the Excursion and reduced the number of Expeditions being made 3 years ago. They closed plants. They speed up the development of the European Fiesta, which is supposed to be the Civic killer. I don't see why the Republicans would be willing to throw them all under the bus!!!

[Lerianis]

Because, that is just 'window dressing'. The real thing that they will do, is as soon as they get federal dollars.... go back to building big trucks and SUV's.

[ppgreat]

What disturbs me the most about the bailout is the lack of benchmarks for the green car statements.

It would be different if the bill stated, "Yes, we will lend you billions of dollars if you convert 50% of your vehicles in 4 years to plug-in/hybrid vehicles" versus the Big Three saying "Yes, we'll make investments in green cars."

[fusillijerry]

With all the talk about weaning off fossil fuels due to little issues like wars in the Middle East and the collapse of a stable environment, it's about time that the Big 3 realize that their lobbying was in effect self-defeating. By resisting emissions caps, they shrank their global reach. Thanks to their resistance to alternative fuels, foreign manufacturers are winning the domestic market. It's very clear they didn't do what the market needed them to do, so in a free market, those firms go bust. It ain't pretty, but in order to build a new infrastructure that isn't dependent on fuel from countries who hate us, we have to dismantle the old order. Change hurts, but don't worry, there will be jobs created as a result of this carnage.

[Robot-Killer-Bee]

I am inclined to agree with the Republicans on this one. Despite wreaking havoc in the auto market, I think it will ultimately speed up the process of recovering the economy. The more the government spends on bailouts, the higher the demands on government to use the tax-payer's money efficiently, which means micro-management, which means more expense, and ultimately, more tax-payer's money.

And if the government's not going to increase taxes significantly to cover the costs, where's that money going to come from? The government's already trillions of dollars in debt due to bad fiscal policy.

The loss of the auto sector will be miniscule compared to what will happen if the government goes bankrupt...

And since when has the US become a socialist country, propping up business and people?

[Lerianis]

Well, in some cases, socialism isn't bad. However, in this case, it is not socialism.... it is corporatism, and that is something that cannot be allowed.
Just like the bailouts of the home loan industry (which, I wouldn't have had problems with if that money had gone into helping people who got in over their heads due to the misrepresentations of the loan industry), these bailouts will just put off the inevitable.

[unknown unknown]

Good, I am glad it failed. How about just focusing on building cars people actually want to buy instead of demanding investment in over priced hybrids and electric vehicles. This is creeping socialism, before your know it we'll be like a good chunk of Europe.

[OS11]

Well, you are 35% right... but we need a Government to go ahead and dictate what they can build. We need 90% electric hybrids by 2015. The Gov needs to follow up with NOT crazy solar or wind idea... but to build 90-130 Nuclear Plants during that same time period to carry the LOAD.

We DO need to be like EUROPE.. they live MUCH better lives than we do... but that being said... we have FAR greater distances to travel... thus Nuclear is the ONLY option if we are to remain competitive against smaller geographic areas like Europe, Japan, China.

This isn't about socialism... again, MANY countries like Denmark, Norway, Germany live FAR better than us. It's about "power"... repeat....... again it's about "power"... to push heavy weight through the atmosphere. The lighter the car, the better, getting all trucks off the road and onto rail... the better...

Perfect ideas... Ban any US Automaker from building ANY non hybrid by 2015... restrict imports or domestic built auto to the same.

Get Gas back up to $3.50 a gallon! Good god, I filled up for $16.50 today, 14ish gallons, $1.38 per gal... that is CRIMINAL against the planet and our efforts to get transportation costs in line with reality. In 50 years with TWICE the population, Autos based on 100% CARBON will not work... wake up people!

Think about what I've just said.................

[OS11]

It is now clear the UAW needs to accept $49 per hour or end up with $0 per hour.

The UAW is the biggest CANCER on America... they are purely American Terrorists and will fight to kill off the American way of life unless they are stopped.

So let's all rally around the "American Worker" and kill off this bacteria before it kills off US automakers.

The last remnants of the UAW may bicker or complain, but ignore them... they are much of the reason companies like GM haven't been able to succeed. Unions make NO SENSE in a modern economy.

Once they learn that, we can WIN again...

-----

[mltrafton]

Subject: America's Defense made in China

Don't forget the automobile industry was converted to wartime production during World War II in two months to enable us to mobilize and a fight against our enemies. Are we going to have to order military equipment and supplies from those we may be battling against? Before it is too late and we are only a service society with the only manufacturing being done in America is like what we are seeing in the transplant automakers, where we do assembly of components produced off-shore with very little manufacturing done here.

Placing an order to a manufacturer in Japan or China may not get the response we want or need to defend ourselves in the future. Let's not give up on manufacturing and have to go off shore to enable us to defend ourselves. Support our national defense through a strong manufacturing base here in America and keep America strong.

American must support Americans and American companies otherwire how else will!

[Lerianis]

The UAW is NOT a cancer on America. Most of the "American way of llife" is SOLELY BECAUSE of the UAW, and their insistence on: paid time off, paid sick time, reasonable wages, etc.
Without the UAW, we would still be in sweatshop times.

[mltrafton]

What is wrong with everyone?

How people are able to buys cars? Do they not go out and get a loan. Guess what it is very difficult to get a loan. What is the result of this inability to get a loan? Cars are not purchased. Hence the problem you are seeing today. We are not talking about an item you can put on most peoples credit card, here this is a $15-$30k dollar investment. If it were not for the credit mess created in part by the congress allowing people to purchase homes that everyone knew they could not afford, credit would be available to purchase cars.

Unless credit is "loosened up" a bit, no one will be able to get loans so the car makers will still not be able to sell cars, a situation to which they have no control. Current credit scores range from 375 to 900 points, and in general, a score of 650 or above indicates a very good credit history. Average FICO scores fall into the range between 620 and 650. Currently you require over a 700 credit score to obtain a car loan when we the taxpayers have spent all this money revitalizing the financial market.

Michael L. Trafton
Orion Twp, MI

[Lerianis]

That 'investment' is also too high. Most of the cars today I wouldn't pay 9K for, let alone 3 to 4 times that much, even the SUV's. No, all my cars are going to be 'used' or foreign, since they actually have good prices.

[spothannah]

I think this is another form of our evolving into a global economy. We need to bring the standard of living for all citizens of the planet to a more equitable level. This will hurt high standard of living citizens only "momentarily" (although subjectively it will be "hell") but in the long run it will increase the "average " buying power of citizens and thereby increase the global economy which will effect us all in a positive fashion. It's this "interim" in which techonology lowers overall costs and thereby increases average standards of living that is uncomfortable. We need to all work together, globally, to improve everyone's standard of living. This will come home to us and also help us. It's the "right/ethical" thing to do. Human experience, not "money", should be our metric of "goodness."

[arnold73]

Giving them money is so stupid, it is mind boggling.
Anyone that gets money for nothing will become useless. I dont care if it is one of the biggest companies in the world. It also creates a huge moral dilemma. I for one am struggling with a small business. Why are they entitled to a big bailout and I am not.

So here is my suggestion, if they are bent on helping the car makers. Order cars from them!. Upgrade military vehicles, embassy vehicles, police cars, agency vehicles etc.

If their business is not making a profit right now becuase the companies are bloated, what is more money going to do for them other than prolong the suffering.

Downsize and tighten the ship like the rest of us have to. Or cut wages in half. If the auto workers think they are so much more valuable than the rest of us that they are entitled to huge salaries and benefits, maybe it is time to wake up. We have been substidizing their bennies when buying cars for too long anyway.

[otismyboy]

I have come across some interesting statistics that shows who really pays the taxes to the federal government. I am from Michigan and have known for years that the state pays more to the federal government than they receive. Further more, there are a lot of southern states that get more back than they pay. I was able to see the pay in / receive back ratio of every state from a 2005 stat off the web. I then looked at the percentage of union members of the total work force of each state. If the total union membership was greater than 10 percent, then I would color the state in on the pay in / receive back US map. Below are my findings: 50 states and District of Columbia



10 or > percent Union membership states ===> 28

More Federal money back ==> 13

Less Federal money back ==> 15



Non Union membership states ==> 23

More Federal money back ==> 20

Less Federal money back ==> 3





I am 52 and have been working all my life since 14. I was in the union for 15 years and the last 17 years in management. I am not for or against unions and my work is not related to automobiles. It troubles me how some people in our country especially the southern legislators want the Midwest Auto Manufactures to bite the dust. The way I see it, if that was to happen, the southern states better get ready for their federal government hand outs to end. It almost looks like the federal government takes the rust belt money, gives it to the southern states who give tax incentives to foreign auto manufactures. I say the federal government owes many of the rust belt states a lot of money for all the years they have been stiffed. With everybody bashing unions, it seems like the states that have the most union membership pay most of the federal taxes. It would be interesting if some reporter would look into this, since it is one of the hottest topics of late.

As an added note, Alabama receives back $1.77 from their $1 investment.....not a bad investment...... Michigan gets $0.85...I hope the Alabama Congressman is ready to give up 30-40 cents of their state welfare from the federal government. The States impacted most by the auto company failures will need it for unemployment insurance, food stamps etc.