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Auto Bailout Talks Collapse as Senate Deadlocks Over Wages
Auto industry executives and lawmakers supportive of the industry have said they hope that the Federal Reserve might step in with a loan or that Treasury Secretary Henry M. Paulson Jr. might provide emergency funding from the government's financial rescue program. But Paulson and others in the Bush administration -- which had urged the Senate to pass the bailout measure approved by the House -- have argued that the rescue program is intended to stabilize the financial services industry and should not be used for other purposes.
"That is the only viable option available at this time," House Speaker Nancy Pelosi (D-Calif.) said in a statement after the Senate vote.
In discussions with the White House this week, congressional Democrats again raised the idea of funding the automaker bailout out of the rescue program. White House spokesman Tony Fratto said yesterday before the talks collapsed that the administration "has not engaged" lawmakers on the proposal.
The failed negotiations came despite a plea earlier in the day from President-elect Barack Obama for passage of the legislation to spare GM or Chrysler from having to file for bankruptcy protection, a prospect that has grown real enough for both firms to hire lawyers to deal with such a scenario. Chrysler acknowledged last week that it was working with Jones Day; last night, sources said GM had hired Weil, Gotshal & Manges, as well as turnaround veterans William Repko of Evercore Partners, Arthur Newman of Blackstone Group and Jay Alix.
It wasn't clear whether GM, in particular, could survive until January. If the industry can hang on that long, Reid said last night, the legislation would be revived next year -- when a Democratic majority in the Senate might be large enough to defeat any GOP filibuster attempts.
Corker and Sen. Christopher J. Dodd (D-Conn.), chairman of the Banking Committee, had led negotiations all afternoon and into the evening trying rescue the faltering proposal.
"Nothing is agreed to until everything is agreed to," said Dodd, who appeared to be somewhat optimistic as he exited the negotiations after 8 p.m.
The negotiations were based on a plan advanced by Corker, the most junior member of the Banking Committee. His proposal sought to reduce the wages and benefits of union workers by requiring the automakers' total labor costs to be "on par" with Honda and Toyota.
The two sides agreed to most other issues, including those requiring automakers to reduce their debt obligations by at least two-thirds through an equity swap with bondholders. Payouts to workers who are laid off or temporarily furloughed would have been terminated.
Ford, unlike General Motors and Chrysler, has said it does not need bridge loans at this point and would not need to agree to those conditions.
But no agreement could be reached on the wage reductions. "It sounds like UAW blew up the deal," Sen. Jim DeMint (R-S.C.) said afterward.
The initial agreement in the House called for the government to issue the loans to GM and Chrysler as early as next week and for President Bush to immediately name a "car czar" to oversee the bailout. The companies would be required by March 31 to cut costs, restructure debt and obtain concessions from labor sufficient to report a positive net present value.