Thursday, December 11, 2008

US car bail-out fails in Senate

A $14bn (£9.4bn) bail-out package for the beleaguered US car industry has died in the Senate after failing to get enough support in a procedural vote.

The failure came after bipartisan talks on the rescue plan collapsed over Republican demands that the United Auto Workers union agree to swift wage cuts.

The White House said the bill had been the Big Three car makers' "best chance to avoid a disorderly bankruptcy".

The House of Representatives passed the White House-backed bill on Wednesday.

The Democrats needed some Republicans to back the bill in the Senate as they have a majority of just one, and some in their own party were expected to vote against.

'Three words away'

The BBC's Andy Gallacher in Washington says it was always going to be a battle to get the US Senate to approve the $14bn bridging loan.

The atmosphere in the Senate was tense and at times emotional, our correspondent says, as the Democrats made last minute pleas to get their Republican counterparts to vote in favour of helping America's biggest car makers - General Motors, Chrysler and Ford.

The Senate majority leader, Harry Reid, said he was "terribly disappointed" when it became clear the vote had collapsed, calling it a "a loss for the country".

"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," he said.

"Millions of Americans, not only the auto workers but people who sell cars, car dealerships, people who work on cars are going to be directly impacted and affected."

The news brought a sharp fall in share prices in Japan, Taiwan, South Korea and Australia.

Sen Reid said there had been too many differences between the Democratic and Republican representatives.

The Republicans left the closed-door meetings after refusing to give the car makers federal aid unless the United Auto Workers union agreed to cut wages next year to bring its members into line with their Japanese counterparts.

Republican Sen Bob Corker said the two sides had been very close to a deal, but that the UAW's rejection of wage concessions before 2011, when its current contract with the car makers expires, had kept them apart.

"We were about three words away from a deal," he said. "We solved everything substantively and about three words keep us from reaching a conclusion."

Alan Reuther, the UAW's legislative director, declined to comment to reporters as he left a meeting room during the negotiations, according to the Associated Press.

Our correspondent says it is clear now that there will be no Congressional action on a bail-out this year.

White House spokesman Tony Fratto said the government would evaluate its options in light of the collapse of the negotiations, but did not elaborate.

"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," he said.

President-elect Barack Obama had said he supported the bill.

The deal would have given the Big Three access to emergency funding to help them cope with the sharp downturn in sales because of the global financial crisis.

General Motors and Chrysler say they risk ruin without immediate aid. Ford says it may need funds in the future. The three firms called for $34bn between them when their bosses recently went before Congress to put their case.

The Big Three have all seen sales fall sharply this year in the US.

While this decline reflects an industry-wide fall that has also hit European and Japanese carmakers in the US, they have also been criticised for not offering an attractive range of vehicles.

Story from BBC NEWS:

Published: 2008/12/12 05:24:02 GMT

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