$14 billion deal fails over union wage cuts

New cars are seen at a parking lot next to a Chrysler plant in Detroit, Michigan December 10, 2008. REUTERS/Carlos Barria

A $14 billion rescue plan for the beleaguered auto industry has collapsed after the Senate failed to reach a compromise over worker wage and benefit cuts.
“I’m terribly disappointed that we are not able to arrive at a conclusion,” Senate Majority Leader Harry Reid said early Friday after Democrats and Republicans spent hours trying to hammer out a deal.

The talks, effectively the last chance of congressional action this year, centered on possible concessions from the United Auto Workers union as well as large-scale debt restructuring by the Big Three car manufacturers — General Motors, Ford and Chrysler.

Republicans had balked at giving the car makers federal aid unless the powerful union agreed to slash wages next year to bring them into line with those of Japanese car manufacturers.

But George Voinovich, a Republican senator, said the union proved unwilling to make the cuts before 2011.

Reid called the bill’s collapse “a loss for the country”.

“I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

The White House, meanwhile, announced it would assess its options for moving forward.

“It’s disappointing that Congress failed to act tonight,” Tony Fratto, a spokesman for the White House, said. “We will evaluate our options in light of the breakdown in congress.”

Republican opposition

The Senate pushed ahead on Thursday with a procedural vote on the Democratic-sponsored bill negotiated with the White House, which ultimately failed.

“None of us want to see them go down but very few of us had anything to do with the dilemma that they’ve created for themselves,” said Republican Senate Minority Leader Mitch McConnell.

A similar version of the plan had passed in the House of Representatives on Wednesday night by a vote of 237-170, but the senate had to pass the deal before George Bush, the US president, could sign it into law.

Republicans in the Senate appeared to have strengthened their opposition to the proposed bailout package, despite pleas from the White House and U.S. president-elect Barack Obama to pass the measure.

McConnell said he and his allies opposed the measure because “we thought it, frankly, wouldn’t work.”

“None of us want to see them go down but very few of us had anything to do with the dilemma that they’ve created for themselves,” McConnell said.

In Chicago, Obama said the U.S. government could not leave the industry to collapse, saying it would have a “devastating ripple effect” throughout the U.S. economy.

White House spokeswoman Dana Perino echoed Obama’s statement, saying the meltdown of the car industry was “something our economy can’t withstand at the moment.”

“We believe that the economy is in such a weakened state right now that adding another possible loss of one million jobs is just something our economy cannot sustain at the moment,” she said.

Firms criticised

Ford, Chrysler and General Motors, have spent weeks pleading with U.S. politicians to assist their ailing firms, saying their collapse could devastate the economy and cause millions of job losses.

Car manufacturer executives say their firms will collapse if no bailout is passed. All have been criticised for failing to restructure and adapt to the market by providing more fuel-efficient vehicles.

Al Jazeera Washington correspondent Rob Reynolds, said there was a political battle fought behind the scenes and some Republicans were being open about their desire to see trade unions take a “big hit” on the issue.

“[The UAW] has spent a lot of money… to defeat Republican candidates, including some of the very senators who have voted on the measure,” Reynolds said.

“So there’s political bad blood in there, and there’s a desire, many union officials feel, on the part of these Republicans from southern states to cut the union down to size.”

GM and Chrysler were asking for billions of dollars of federal asisstance by the end of the month just to survive, while Ford has asked for a line of credit if its finances worsen more than expected in 2009.

Under the proposed bailout terms, the loans were intended to assist the firms until the end of March 2009, after which future help would depend on the quality of restructuring plans demonstrating their viability.

A presidentially appointed trustee, or “car czar” would have then enforced the loan conditions and judged the restructuring plans and could recommend bankruptcy if he or she deemed the companies’ plans to be insufficient.

-Aljazeera