Thursday, December 11, 2008
U.S. Senate Kills Auto Industry Bailout For Now; Alaska U.S. Senator Lisa Murkowski Voted Against Bailout, Ted Stevens Abstained
On December 11th, 2008, by a vote of 52-35 with 12 Senators abstaining, the U.S. Senate failed in an attempt to proceed with legislation which was passed by the U.S. House on December 10th which would have provided new loans for America's troubled auto industry. A "Yes" vote was a vote to formally consider the House bill and a "No" vote was a vote to stop its progress. Critical media stories published by CNN Money, the New York Times, McClatchyDC, the Associated Press, the Detroit Free Press, and the BBC.
The complete list of U.S. Senators and how they voted can be viewed HERE. Senator Lisa Murkowski voted No, while Senator Ted Stevens abstained. Senator Murkowski's No vote was not unexpected; she was known to be unfavorably disposed towards the bailout in advance.
Although the Senate voted 52-35 to bring the measure for a vote, this was short of the 60 votes needed to advance the legislation. The failure followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that all sides could accept. Negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for cuts in pay and benefits by the United Automobile Workers (UAW) in 2009.
“It’s over with,” the Senate majority leader, Harry Reid of Nevada, said on the Senate floor, after it was clear that a deal could not be reached. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” Senator Reid also said, “This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”
The Republican leader, Senator Mitch McConnell of Kentucky, said, “We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves.” Senator McConnell also added, “The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work.”
Michigan's Democratic Senator Debbie Stabenow lamented the failure. "Shame on us if we cavalierly walk away and think we can do this another time. . . . This is about whether or not we're going to make a commitment to the middle class and a commitment to American manufacturing," added Senator Stabenow.
Both sides were fairly close to a deal - Senator Bob Corker (R-TN) said the negotiators were two or three words away from a deal. There was little disagreement on two of Corker's points: That companies would be forced to cut outstanding unsecured debt by at least two-thirds, and health and benefit plan funding would get half their scheduled payments in company stock.
However, the negotiators became stuck over labor issues. Corker wanted American auto company workers to earn the same as those who work for foreign-based manufacturers. Republicans wanted the change to take effect next year, but Sen. George Voinovich (R-OH) said the UAW wanted to delay the change until 2011.
This development could possibly doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler LLC potentially following close behind. Already, Chrysler has said it would immediately close 29 plants, lay off 53,000 workers and not pay $7 billion in bills to suppliers. Sen. Kit Bond (R-MO) said Chrysler's suppliers were threatening to demand cash on delivery as soon as Monday December 15th. Meanwhile, GM was expected to announce production cuts today, and has also retained a bankruptcy attorney. And while Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.
The bill, entitled "The Auto Industry Financing & Restructuring Act", would have provided $14 billion in federal loans as a stopgap measure until the new Congress and the incoming Obama administration could reach a longer-term solution. CNN Money published a categorical explanation of this bill in paragraph format earlier in the day which is quite helpful in making sense of it. On December 10th, the U.S. House approved it by a 237-170 vote, with Alaska Congressman Don Young casting one of the Yes votes. Afterwards, Rep. Young explained that 3,600 Alaskan jobs depended upon the bailout.
The White House expressed disappointment with the Senate's failure, but the Bush Administration has a mitigation strategy; they could elect to take the $14 billion from the $700 billion passed earlier in the year and divert it to the automakers.
Halfway around the world, Asian markets reacted unfavorably after their Friday opening. As of this post time, Japan's Nikkei 225 was down 4.6 percent to 8318.30, the Topix Index was off 3.6% to 818.56, and Hong Kong's Hang Seng Index plunged 6% to 14675.41.
It appears bailout fatigue has finally reached Congress. This was not the first batch of loans requested by the auto industry; they got $25 billion from Congress on September 30th. Apparently, many Senators were concerned that this would not be the last request from the auto industry, and that they would use it as an excuse to put their hands out again and again.