Auto bailout package fails in Senate
Breakdown over labor wages derails multibillion loan package to U.S. automakers, who have been expected to invest in technologies such as plug-in electric cars.
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 wouldof 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.