By KEN THOMAS and JULIE HIRSCHFELD DAVIS - Associated Press Writers
Published: November 20, 2008
WASHINGTON - The $25 billion rescue plan for the auto industry, desperately sought by the beleaguered Detroit Three, collapsed Thursday as Congress drew the line at one more bailout and Democrats said they wouldn't even consider it until the companies produced a convincing plan for rebuilding their once-mighty industry.
Auto industry executives, from left, General Motors Chief Executive Officer Richard Wagoner; Chrysler Chief Executive Officer Robert Nardelli; and Ford Chief Executive Officer Alan Mulally, testify on Capitol Hill in Washington, Wednesday. AP Photo
Advertisement
The demise of the rescue — at least for now — left uncertain the fate of General Motors Corp., Ford Motor Co. and Chrysler LLC, and sent Wall Street spiraling to its lowest level in years. The Dow Jones industrials dropped 445 points, the second straight plunge of more than 400, and hit the lowest point in nearly six years.
The carmakers have been clobbered by lackluster sales and choked credit, and are battling to stay afloat through year's end. Failure of one or more of the Detroit Three would be a severe further blow to the floundering economy — and to many Americans' view of the nation's industrial strength — and throw a million or more additional workers off the job.
Just Thursday, the government reported that laid-off workers' new claims for jobless aid had reached a 16-year high and the number of Americans searching for work had soared past 10 million. Congress approved a measure to extend jobless benefits through the holidays, and the White House said President George W. Bush would quickly sign it.
But Democratic leaders scrapped votes on the auto rescue, postponing until next month a politically tricky decision on whether to approve yet another unpopular bailout at a time of economic peril, or risk being blamed for the implosion of an industry that employs millions and has broad reach into all aspects of the U.S. economy.
"Until they show us the plan, we cannot show them the money," Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.
GM, Ford and Chrysler quickly issued statements promising to submit the blueprint the Democrats demanded.
Pelosi and Senate Majority Leader Harry Reid, D-Nev., said Congress might return to work in early December for a vote on aid to the carmakers — but only if they show Congress they could use the funds to transform their struggling industry into a viable one.
For now, however, the Democrats said the aid plan lacked the support to pass Congress and be signed by Bush.
Bush and congressional Republicans had balked at Democrats' suggestion to draw emergency auto industry loans from the $700 billion Wall Street rescue fund. And most Democrats were unwilling to go along with a separate, bipartisan effort backed by the White House to temporarily divert an existing program to help carmakers produce vehicles that burn less gasoline to cover the companies immediate financial needs.
But with GM warning it could go under before year's end, Democratic leaders were unwilling to close up shop for the year and appear to turn a deaf ear to the industry. They called for a Detroit Three viability plan by Dec. 2, scheduled hearings that week on the report, and said a vote on a bailout could come the week of Dec. 8.
"Yes, we're kicking the can down the road, because that will give us the opportunity to do something positive," Reid said. "But that will only happen if they get their act together."
The White House criticized the delay, saying the plan to let the automakers tap the fuel-efficiency loans for their short-term cash needs should be considered.
"If there are lawmakers who want to help the automakers, and they have a path to do so, why are they going to kick the can down the road?" said Dana Perino, the White House press secretary.
The chief executives of the Detroit Three automakers appealed personally to lawmakers for the loans this week, saying their problem was the economic meltdown that has walloped their industry — not that they were manufacturing unappealing cars.
But whatever support they found sagged when it became known that each of them had flown into Washington aboard multimillion-dollar corporate jets. Reid observed that was "difficult to explain" to taxpayers in his hometown of Searchlight, Nev.
Pelosi said she had little patience left for excuses from the carmakers on why they haven't turned their businesses around.
Beyond the auto industry, lawmakers said the public has little appetite for anything else that smacks of a bailout, following the backlash against the $700 billion financial rescue.
"There is a sense that we did not do a good enough job of safeguarding the use of those funds, or providing prevention against abuse. And you could not get, I believe, through either house of Congress today what some people might think was a repeat. That's why we need to take time," said Rep. Barney Frank, D-Mass.
Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives' pay packages and prohibit use of the funds for lobbying or paying shareholders dividends.
In scrapping plans for a vote this week, the Democratic leaders sidetracked a bipartisan agreement to temporarily divert the fuel-efficiency funds to cover the auto companies' operations.
Sen. Carl Levin, D-Mich., said that plan had a "reasonable chance" of passing, and that the leaders' decision to delay it was "risky and unnecessary."
"We need speed. This is a very, very important moment," Levin said.
Indeed, the Democratic Congress — having just expanded its majorities in this month's elections — was under immense pressure to show it could govern in a difficult situation.
"I can't imagine a scenario where they wouldn't come back, unless the answer is that they just don't care. And if that's the case, then the American people ought to know that," Perino said.
The leaders of the Detroit Three automakers have painted a grim picture of their financial position. They burned through nearly $18 billion in cash reserves during the last quarter — about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. GM and Chrysler have said they could collapse in weeks.
The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.
Michigan's Democratic Gov. Jennifer Granholm said in a statement Thursday that she is encouraged that the Detroit Three will have another opportunity to make their case.
"It is clear that both the U.S. House and Senate are unwilling to allow the companies to go into bankruptcy," Granholm said. "They recognize, as I do, that far too many workers and businesses depend on this critical sector of our economy."
___
Associated Press writers Ken Thomas, David Espo, Andrew Taylor and Jennifer Loven contributed to this report.
Thank you for joining our conversations on newsok. We encourage your discussions but ask that you stay within the bounds of our terms and conditions. Please help us by reporting comments that violate these guidelines. To review our rules of engagement, go to Commenting and posting policy.
Kevin - salaries and bonuses are determined by the market. If Goldman Sachs doesn't pay bonuses, who's going to work for them at that level? Just like you wouldn't work for someone who wasn't paying the equivalent of what you can make anywhere else.
Why a bailout? Why not a loan. Chrysler borrowed 5 billion from the government, and payed back about 7 billion. Why not loan the big 3 enough money to keep them going now, and collect in a couple of years? I don't understand the bailout stuff. Why is government all of the sudden just giving money away? In the last 8 years, we've seen government give money to just about everybody. It's out of control.
Life experience has taught me to not trust the 'captains of industry' to look out for my best interest. When I hear of executive salaries and bonuses being cut, THEN maybe I would think labor unions should renegotiate contracts. Even Goldman Sachs didn't do away with executive bonuses, they merely froze them. Who are THEY looking out for?
Kevin, Oklahoma City, one of the sweeter things for decent people to contemplate with the out and out bankruptcy of The Big Three is that it would effectively put an end to the UAW. That's why I lean toward just the all-out go bankrupt side for the Big Three, because, all things being equal, this would be a better country without unions in general and the UAW in particular.
Lisa, that "2.5 million jobs lost" nonsense was debunked yesterday on the cable channels: to get that bogus number you have to count every single dealership in the country plus a bunch of folks who are only tangentially in the auto industry. But let's put that aside. I wouldn't care if it was 2.5 or 25 million or 250 million jobs that were going to be lost, it is not the taxpayer's problem to bail out deadbeat businesses. Why is this basic tenet of the free market so hard for people to grasp? Ford, GM, and Chrysler are deadbeat businesses. They should either file for reorganization, or just go belly up. The latter would be preferable, as I don't believe they are EVER going to clean up their respective acts.
They taught us in business school the first rule of business is location, location, location. The rest is wheter the business's products are good enough to sell. The Ford company was in the habit of screwing their customers over...They sent our jobs to other countries yet they come looking for hand-outs hat in hand to jab another knife of the American workers. If a business fails, it is the BUSINESS'S fault. Nobody else's. Time for some REAL competition in America. The only people whining are the spoiled rich owners and the spoiled stock and share-holders. Let them die a dignified death. I have a song for u by the Eagles: GET OVER IT.
They should file chapter 11 and reorganize. GM has a ton of "legacy" expenses. The unions kept coming back to the feeding trough until there was nothing left to give.
If the US Auto Industry ceases to exist, those jobs, and the jobs that result from that industry, will equal 2.5 million lost American jobs. Wake up and smell the coffee! THAT effects us all. These jobs and the pensions that workers have spent a lifetime paying into should be protected. I'm not speaking of the executives that must be made to take responsibility for the economic situation of their companies. That's what they've been getting the big bucks for, right? And, they've done a dismal job. If it were any of us "ordinary Joe's" we would be handed a pink slip and so should they. No settlement of their contracts should be allowed because they did not live up to their end of the contract. Their pension should be frozen until such a time that the pension of all other employees has been restored. All stock held by these executive should be seized and put in a pool to be distributed to the individuals that create and work with the companies to make them financially sound again. All lobbying should be restricted. A committee made up of professionals from the auto industry, bean counters from the government, and informed citizens should be created to evaluate and report back to Congress and the US Citizens. This industry has come begging because the ones making the decisions have operated irresponibly. And yes, the unions must accept their part (and greed) in creating this mess. The workers need to decide if it is more important to be a union member or have a job and be a part of an industry that has been one of the backbones of the US economic structure for many years. As for the CEO's, part of their jobs were to keep abreast of their market and that wasn't accomplished either. Citizens aren't buying US Cars because they are over-priced, do not last as long as their foreign counterparts or rarely have the fuel efficiency, and do not have the resale value of the foreign cars. What's more - most of us are not ready to buy new cars right now because we feel that maybe - finally - the technology for more efficient fuel-burning autos will made available soon and we don't want to be paying on these gas gusslers that are one the lots now when that time comes. Blaming low sales on credit not being available is just plain lame. By expecting us to buy that story the CEO's are being disrespectful to the people they are asking to bail them out. Bottom line - It is important that this be a hand UP and NOT a hand OUT.
Yup, its all the fault of unions. If it weren't for those rascally unions, the automotive industry executives wouldn't have made stupid decisions and wouldn't be begging for but half a bazillion dollar so they can keep their kids in prep schools and hire nannies to take care of them when they're home, and so they can keep their country club dues paid at all of their estates instead of just the ones they call home, and lord knows the maintenance on private jets isn't cheap...
Let them fail - no more absurd welfare handouts to deadbeat companies and multi-millionaires. Besides which, we are in the midst of seeing how the 700 billion dollar welfare handout to Wall Street millionaires is failing as we speak. But then, it was never as advertised: it was always about bailing out the moral equivalent of Las Vegas card sharks who'd gambled their earnings away and wanted the American taxpayer to make it good. And Tom Coburn and Mary Fallin went right along with it, and saddled this nation's children with another 700 billion dollars in debt.
I have a better idea...let them companies fail and bail themselves out I mean they dont want to give up their luxuries (ie private jets) then why should we waste tax dollars to save them because if we do save them then we are saving the unions which has created this mess by making deals that the auto segment KNEW they couldnt support....these companies need to cut their ties with the unions in short you could train monkeys to do the jobs these guys are doing for 47 to 57 dollars an hour....
Showing a plan assuring economic viability to the likes of Chris Dodd, Barney Frank, Nancy Pelosi and Harry Reid is absolutely absurd. They haven't a clue as to how or what it takes to run an automotive industry.
These people are calling them back to Washington for another try to "sell it" to the American people. It will have to include things the leftist congress wants and will be a way for the government to take control of another part of our economy, known as Collectivism and Socialism. We are heading in the opposite direction of any worthy fix.
Fourth of July Page
Share your July 4th photos with NewsOK and view other stories and videos.
Multimedia
Related to this story
Articles
Jobless claims across the United States jump... 11/20/2008 WASHINGTON -- New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a...
Congress rushing to extend jobless benefits 11/20/2008 WASHINGTON - Jarred by new jobless alarms, Congress rushed Thursday toward keeping unemployment checks flowing through the December holidays and into the new...
19
Prev
Something to say about this topic? Submit a Letter to the Editor online
Thank you for joining our conversations on newsok. We encourage your discussions but ask that you stay within the bounds of our terms and conditions. Please help us by reporting comments that violate these guidelines. To review our rules of engagement, go to Commenting and posting policy.
Log in below or sign up (it's free).
Toyota is running circles around these companies.
Lisa, OKC
These people are calling them back to Washington for another try to "sell it" to the American people. It will have to include things the leftist congress wants and will be a way for the government to take control of another part of our economy, known as Collectivism and Socialism. We are heading in the opposite direction of any worthy fix.