Senate Kills Proposed Auto Industry Bailout

(MoneyWatch)  It looks like rescuing the U.S. auto industry ?€" or not ?€" will be up the incoming Obama Administration, as the U.S. Senate stopped the proposed industry bailout in its tracks.

GM and Chrysler have little choice but to "run on fumes" until a new Congress is installed Jan. 5, and try again, said Brian Johnson, auto industry analyst for Barclays Capital. President-elect Obama takes office Jan. 20.

The House of Representatives on Dec. 10 passed emergency loans totaling $14 billion for GM and Chrysler. Those two companies warned earlier that they could run short of cash unless they received government assistance by Dec. 31. Ford said it did not need short-term funding, but asked for access to a line of credit in case business conditions get worse.

However, the more conservative Senate was not to be rushed. Sen. Bob Corker, R-Tenn., proposed an alternative to the House bill that called on automakers to cut their debt by two-thirds, and for the UAW to accept pay cuts that would put them on a par with non-union workers. That proposal also fell flat last night, Dec. 11, and so the proposed bailout was dead.

House Speaker Nancy Pelosi, D-Calif., complained in a written statement about the Senate killing the "bipartisan" compromise that the House had worked out with the Bush Administration, and called on President Bush to use money from the $700 billion financial-services industry bailout to help the U.S. automakers. That would require an unlikely about-face by the Bush Administration.

"The consequences of the Senate Republicans' failure to act could be devastating to our economy, detrimental to workers, and destructive to the American automobile industry unless the President immediately directs (U.S. Treasury) Secretary Paulson to explore other short-term financial assistance options, including TARP (the Troubled Asset Relief Program) and those available to the Federal Reserve," Pelosi said.

"That is the only viable option available at this time," she said.