Wage Demands Sink Auto Bailout In Senate

Sen. Christopher Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, makes a phone call following the Senate's rejection of an emergency $14 billion loan bailout for auto makers, Dec. 11, 2008, on Capitol Hill in Washington. AP Photo/Haraz N. Ghanbari

A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

"We were about three words away from a deal," said Sen. Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts.

Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Reid called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

GM said in a statement it was "deeply disappointed" that the bipartisan agreement faltered. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said.

Earlier in the day, in a move that signaled their lack of confidence in a bailout, GM and Chrysler hired teams of bankruptcy attorneys, reports CBS News correspondent Sharyl Attkisson.

The White House said it was evaluating its options in light of the breakdown.

"It's disappointing that Congress failed to act tonight," a White House statement said. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

The Senate rejected the bailout 52-35 on a procedural vote - well short of the 60 required - after the talks fell apart.

"I think [the Senators] are calling their bluff, but I think they felt the American people were at greater risk," Peter Morici, a University of Maryland economist, told CBS' The Early Show.

The implosion followed an unprecedented marathon negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

"This is a colossal failure in leadership," Lansing Mayor Virg Bernero said on The Early Show. "It puts the economy closer to the cliff and I think we see that already in the reaction."

World markets plunged following news of the bailout's failure and most expect a rough day on Wall Street.

(AP Photo/Paul Sancya)
(Left: Workers leave the Chrysler Truck Assembly plant in Warren, Mich., Dec. 11, 2008.)

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.

"I believe the president of the UAW, Ron Gettelfinger, was too unrealistic and too selfish," Morici said on The Early Show.

But some are taking Congress to task for expecting too much from the union.

"I find it highly ironic to have Congress people lecturing the UAW about cutting their wages," Bernero told the The Early Show. "Why don't we put Congress people and senators on merit pay and see what they would be making. What has their productivity been? Give me a break."

Aid the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

The stunning disintegration was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected in a bailout-fatigued postelection Congress, with Mr. Bush's influence at a low ebb.

Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and also urged the Bush administration and the Federal Reserve to provide short-term relief for the automakers. "That is the only viable option available at this time," she said.

Congressional Republicans were already in open revolt against Mr. Bush over an auto bailout deal the White House negotiated with congressional Democrats, passed by the House passed on Wednesday.

The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to the White House-backed rescue bill passed by the House on Wednesday.

He and other Republicans said wages and benefits for employees of Detroit's Big Three should be renegotiated to bring them in line with those paid by Japanese carmakers Toyota, Honda and Nissan in the United States.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.

GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package and the Senate dropped them from its package.

Some Senate Democrats joined Republicans in turning against the House-passed bill - despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

The House-passed bill would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would be compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.

McConnell said that measure "isn't nearly tough enough."

Supporters had an uphill battle pressing the rescue package on a bailout-fatigued Congress - particularly a measure designed to span the administrations of a lame-duck president and his successor. Before the late-day negotiations, patience had begun wearing thin at the Capitol as lawmakers looked ahead to adjourning for the holidays.

The House approved its plan late Wednesday on a vote of 237-170. Supporters cited dire warnings from GM and Chrysler executives, who have said they could run out of cash within weeks.

A pair of polls released Thursday indicated that the public is dubious about the rescue plan.

Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.

In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.
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