WASHINGTON (Dec. 12, 2008) — The Senate late Thursday rejected an emergency bill to rescue Detroit auto makers, heightening prospects that General Motors Corp. and Chrysler LLC may collapse.
"We have not been able to get this over the finish line," Senate Majority Leader Harry Reid said after 10 p.m., following daylong negotiations to broker a deal among lawmakers, auto makers, auto workers and other interest groups.
A House-passed bill to provide $14 billion in short-term loans — negotiated by the Bush White House and congressional Democratic leaders — was known to be in trouble. But few could have predicted the final stumbling block: A dispute over when UAW workers would consent to have their wages reduced to match those paid to nonunion workers in U.S. import-brand factories.
"We are three words away" from an agreement, said Sen. Bob Corker, R-Tenn., author of a GOP alternative. He said workers wouldn´t accept a 2009 deadline for the parity demand.
Forty-three Democrats and 10 Republicans voted to move ahead with legislation, seven short of the number needed to consider the measure.
The rejection leaves GM and Chrysler LLC scrambling for ways to get the combined $11 billion they say they need this month to stay solvent.
In an interview with the Associated Press published Thursday night, Chrysler Chief Financial Officer Ron Kolka said the company is nearing the minimum level of cash it needs to operate and will have trouble paying bills after the first of the year.
Kolka said some parts suppliers and other vendors have demanded cash on delivery but the company is fending them off, according to the AP.
The company, which has suffered the industry´s sharpest drop in sales this year, has little revenue coming in and must pay suppliers $7 billion every 45 days, Kolka said.
GM has also said it may not have enough money to operate by year-end.
It sought an immediate $4 billion, part of an overall $18 billion request in loans and credit lines.
"We are deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts," GM said in a statement. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis." Chrysler echoed GM in its statement.
Last minute solutions?
Some options for the industry remain.
Congress could come back early next year — when Democrats have a wider majority in the Senate — with new legislation.
Or the Bush administration could relent and decide at any time to make direct loans to auto makers from the $700 billion that has been approved for rescue of the financial system.
Democratic lawmakers have maintained all along that the administration had that authority. Reid reaffirmed that view Thursday night.
Some lawmakers have contended that the Federal Reserve always has authority under laws enacted during the Great Depression to make emergency loans to almost any economically important entity that can´t get credit elsewhere.
Economists, researchers and some lawmakers have warned that failure of one or more of the car companies will shatter a U.S. economy already in recession.
Reid said he dreads what will happen on Wall Street on Friday. "It´s not going to be a pleasant sight," he said. He also said the failure of negotiations will mean a "a very, very bad Christmas" for many Americans.