Auto Bailout Talks Collapse

[Tigger Woods]

Auto Bailout Talks Collapse Over Wages
By JULIE HIRSCHFELD DAVIS and DAVID ESPO, AP

WASHINGTON (Dec. 11) - 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.

Senate Majority Leader Harry Reid said he was "terribly disappointed" about the demise of an emerging bipartisan deal to rescue Detroit's Big Three.
He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese carmakers.

Republican Sen. George V. Voinovich of Ohio, a strong bailout supporter, said the UAW was willing to make the cuts — but not until 2011.

Reid was working to set a swift test vote on the measure Thursday night, but it was just a formality. The bill was virtually certain to fail to reach the 60-vote threshold it would need to clear to advance.
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."

The implosion followed an unprecedented marathon set of talks 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.
"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

 

[rascalmom]

Auto Bailout Talks Collapse Over Wages
By JULIE HIRSCHFELD DAVIS and DAVID ESPO, AP

WASHINGTON (Dec. 11) - 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.

Senate Majority Leader Harry Reid said he was "terribly disappointed" about the demise of an emerging bipartisan deal to rescue Detroit's Big Three.
He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese carmakers.

Republican Sen. George V. Voinovich of Ohio, a strong bailout supporter, said the UAW was willing to make the cuts — but not until 2011.Reid was working to set a swift test vote on the measure Thursday night, but it was just a formality. The bill was virtually certain to fail to reach the 60-vote threshold it would need to clear to advance.
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."

The implosion followed an unprecedented marathon set of talks 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.
"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

"We" are not walking away - the union is. I understand it is painful to take a pay cut, but if a plan is not formalized quickly - these people won't have jobs. How can they not understand that the company can't afford to pay them anymore without some concessions and governmental assistance. Why would they balk on the contingencies the Senate wanted to help the bill pass?

2011? More than two years from now - do they not realize there is a crisis NOW?

I think an organized Chapter 11 bankruptcy is the only way to get the automakers where they need to be - profitable and solvent without government intervention - over the long run. I had hoped that the Senate would go in this direction with the bailout loans helping GM begin to go down a better path.

Chrysler I am not sure about - they are privately owned by another company - even that owner is not willing to help them.

Hang on folks - it's going to be a bumpy ride.

 

[AndyLL]

"We" are not walking away - the union is. I understand it is painful to take a pay cut, but if a plan is not formalized quickly - these people won't have jobs. How can they not understand that the company can't afford to pay them anymore without some concessions and governmental assistance. Why would they balk on the contingencies the Senate wanted to help the bill pass?

Hang on folks - it's going to be a bumpy ride.

I'm not a union fan but none of the banks that received loans were forced to reduce pay.

In fact the banks seem to be giving out bonuses, dividends and aquiring other banks.

I think an organized Chapter 11 bankruptcy is the only way to get the automakers where they need to be - profitable and solvent without government intervention - over the long run. I had hoped that the Senate would go in this direction with the bailout loans helping GM begin to go down a better path.

How is GM going to get the money to operate for the next quarter?

 

[rascalmom]

I'm not a union fan but none of the banks that received loans were forced to reduce pay.

The problems with the banks weren't related to non-competitive labor costs. This is at least part of the problem with the Big 3. Not just salary/wage rates, but the number of employees per vehicle produced in comparison to their foreign competitors.In fact the banks seem to be giving out bonuses, dividends and aquiring other banks.

And this is completely wrong - Congress and the Treasury department did us a great disservice by not putting stricter rules in the financial bailout package.
How is GM going to get the money to operate for the next quarter?

I don't know - but it sounds like one of the big hurdles to getting the Senate bill passed was concessions from the union. The union refused. They have a pretty big strike fund - maybe they can loan GM some money.

I think discussions will continue and hopefully people will come back to the table with the willingness to reach agreements - but it is yet be seen whether all parties can come to an agreement before the automakers start defaulting on obligations.

Everyday spent discussing, arguing and posturing puts the industry at bigger risk of going into an unorganized bankruptcy. Much better to agree to the Senate's requirements, take a loan from the taxpayers, make major concessions and contract agreements and save as many jobs as possible.

Make no mistake - no matter which way this situation works out, there will be many jobs lost. They simply have too many workers for their production requirements.

 

[AndyLL]

I don't know - but it sounds like one of the big hurdles to getting the Senate bill passed was concessions from the union. The union refused. They have a pretty big strike fund - maybe they can loan GM some money.

Once again none of the banks had these types of strings attached.

The union has given concessions over the years. They know more are coming but to be forced with no notice smells.

Maybe they remember what happened with United Airlines

I think discussions will continue and hopefully people will come back to the table with the willingness to reach agreements - but it is yet be seen whether all parties can come to an agreement before the automakers start defaulting on obligations.

The Republicans will probably trade their votes for 100 Billion or so of pork like they did last time.

Aftermarket DOW down 300+ in the 1/2 hour since the news... tomorrow will be interesting.

 

[rascalmom]

Once again none of the banks had these types of strings attached.

snip.....

So two wrongs would make a right?

I absolutely think there should have been more "strings" to the financial bailout.

 

[S. C.]

none of the banks that received loans were forced to reduce pay.

In fact the banks seem to be giving out bonuses, dividends and aquiring other banks

I agree!

 

[AndyLL]

So two wrongs would make a right?

I absolutely think there should have been more "strings" to the financial bailout.

It's neither wrong nor right. It was a decision on how to handle it.

The Bush administration... at the urging of the Fed and Treasury... had decided that the best way deal with the crisis was to keep the huge companies afloat with loans because having them collapse was believed to make the situation worst.

Congress went along with these theory.

When they didn't go along with that theory with Lehman then the credit markets froze for 3 weeks and the markets lost 1000s.

The Fed learned its lesson and has since committed 6 Trillion in loans and guarantees to prevent another big collapse.

The 14 Billion for the automakers was less then 2% of the original 700 billion and not even a drop in the bucket to the 6 Trillion.

It's one month of the expense of being in Iraq.

The Republicans are not righting a wrong... they are using politics to attack a union.

Last time they did this it cost the DOW 700 points in a day. Bet it costs us over 1000 this time.

 

[jodifla]

It's neither wrong nor right. It was a decision on how to handle it.

The Bush administration... at the urging of the Fed and Treasury... had decided that the best way deal with the crisis was to keep the huge companies afloat with loans because having them collapse was believed to make the situation worst.

Congress went along with these theory.

When they didn't go along with that theory with Lehman then the credit markets froze for 3 weeks and the markets lost 1000s.

The Fed learned its lesson and has since committed 6 Trillion in loans and guarantees to prevent another big collapse.

The 14 Billion for the automakers was less then 2% of the original 700 billion and not even a drop in the bucket to the 6 Trillion.

It's one month of the expense of being in Iraq.

The Republicans are not righting a wrong... they are using politics to attack a union.

Last time they did this it cost the DOW 700 points in a day. Bet it costs us over 1000 this time.

Yep, it's all politics, and it's all about breaking the union.

Those Republican senators should know what goes around, comes around. It won't be pretty when they are blamed for the collapse of the American job market.

 

[rascalmom]

So the industry should just maintain the status quo (with the crutch of loan money from the U.S. taxpayers) and not make any changes in how they are operating?

Blame it on the Republican senators if you want to, but it is the union who has been holding the industry hostage for decades. Sure they've made concessions - but they are still not competitive.

I don't get why people don't see that a business - any business - has to be able to pay its bills in order to survive. It is not because unions are "bad" or management is "greedy" - expenses are exceeding revenues; reserves and lines of credit are depleted.

If making concessions so that the Senate will pass a bailout bill is what it takes - why not? Isn't it better to have lower pay/benefits than no job at all? And this isn't unexpected - this has been discussed for nearly 30 years....and has been on the front pages for weeks.

Talk about killing the golden goose......

 

[AndyLL]

So the industry should just maintain the status quo (with the crutch of loan money from the U.S. taxpayers) and not make any changes in how they are operating?

Are you claiming that the industry said to Congress that they were just going to maintain status quo?

Of course they stated plenty of changes... just not the one you wanted.

I bet you can't name one change the automakers proposed... Rush doesn't talk about them.

Blame it on the Republican senators if you want to, but it is the union who has been holding the industry hostage for decades. Sure they've made concessions - but they are still not competitive.

The union has been making plenty of concessions for decades. Current workers are paid about the same as Honda and Toyota workers.

It was the executives that have been making the decisions that have made GM not competitive... not the unions.

Why are the Republicans not pushing for the management team to be removed.

If making concessions so that the Senate will pass a bailout bill is what it takes - why not? Isn't it better to have lower pay/benefits than no job at all? And this isn't unexpected - this has been discussed for nearly 30 years....and has been on the front pages for weeks.

The Republican senators had to have 100 Billion of special interest pork added to the original bailout bill and now they are on their high horse about the unions.

They are hypocritical and their supporters are also.

 

[rascalmom]

You are making this an "us" vs. "them" arguement, which is much of the problem.

You are right - I don't know what changes the auto executives are proposing, but not because Rush hasn't talked about them. I do know that the top CEO's offered to cut their pay to $1.00 - which is admirable. I'm sure they have a goal to develop and market more appealing and energy-efficient products - but those things won't help the bottom line much for quite some time. Slashing costs is the best short-term solution right now. I watch CNN, MSNBC & Fox and read WSJ, Time and Newsweek - I just haven't caught much coverage on those details. I am sincerely interested in hearing the proposed solutions - but I bet labor concessions are among them. Rush? Can't stand him & never, ever listen to him. When my radio is on, there is only music. I have a teenage daughter - do you really think I get to pick the station?

I do understand the wage average between a US autoworker and a foreign-owned autoworker is quite close - and I never said that there had not already been concessions. Benefit costs, legacy costs and the number of workers is greatly imbalanced though - even though worldwide they sell about the same number of cars. And the concessions on wages were requested by the end of next year (2009) - that is hardly sudden. The union isn't willing to do so until after 2011. We're not talking about the workers having their pay slashed before Christmas. Not that any decrease would not be tough for most any family - but I'd still rather take a decrease than be without a job at all.

Don't blame Republican senators for all that pork - the House added plenty to THIS bill (judicial pay increases, public transit tax credits) - one of the reasons Republicans resisted. And by the way - my state does have two Republican senators.....neither of whom I like or support.

Posturing doesn't change the fiscal realities of this situation. Without a loan or some form of cash infusion, bankruptcy is looming. At that point the union contracts can be eliminated/renogiated. Better to negotiate now while it's still feasible.

 

[Master Mason]

The Republicans are not righting a wrong... they are using politics to attack a union.
.

I'm sorry, did you miss the part where the Dem's have control of congress and can pass bills without republicans?

you might want to have your guys all on the same side before you go casting stones at the other side, cause if not your just hitting your guys as well.

 

[AndyLL]

I'm sorry, did you miss the part where the Dem's have control of congress and can pass bills without republicans?

you might want to have your guys all on the same side before you go casting stones at the other side, cause if not your just hitting your guys as well.

1) I don't have a side. The only party I've ever registered for in my life is Republican.
2) Count again. There are not 50 Democrates in the Senate and the Republican's have already said they'll fillibuster.
3) Bush has already said he'll give them the money which will be without the strings... so it is just political grandstanding.

 

[minnie61650]

......
I think an organized Chapter 11 bankruptcy is the only way to get the automakers where they need to be - profitable and solvent without government intervention - over the long run. I had hoped that the Senate would go in this direction with the bailout loans helping GM begin to go down a better path......

.

Hang on folks - it's going to be a bumpy ride.

Not just a bumpy ride . We are talking a possible 1-2 million more people out of jobs .

According to this article GM would need $10 billion to file for Chapter 11.

Where would GM get the $10 billion to file?

Excerpt from this article:

Talk of GM bankruptcy filing fuels debate
Some experts say Chapter 11 would help; automaker fears disaster

By Roland Jones
msnbc.com
updated 4:43 p.m. ET Nov. 19, 2


Taken from bottom of page 1

http://www.msnbc.msn.com/id/27787826/

Typically, companies that go into bankruptcy need financing to continue their operations and meet customer needs, and GM would need a lot. Retailer Circuit City, for example, which recently filed for bankruptcy, successfully negotiated a $1.1 billion debtor-in-possession loan to keep stores open as it restructures. Lenders who provide debtor-in-possession financing to a bankrupt firm have priority over other creditors.


The concern is that in the current environment, few lenders would be willing to provide the $10 billion or more that GM would need, raising the risk of a “free-fall” bankruptcy, said Baird.

“It’s like jumping out of a plane without a parachute,” he said. “A company doesn’t have the cash to pay for its operations, and a bankruptcy judge just sells off all its assets. Companies usually do get the financing they need; even Circuit City was able to get a loan to continue operations. But there is some question about whether GM would be able to get the loan they’d need.”

 

[lovemylife]

My DM works for a car manufacturer here in Michigan, where the economy is really bad. She was just told that due to this collapse, that she will be laid off from next Friday until at least Feb 2. If this does not get taken care of, she will not know if or when they will go back. She will be able to get unemployment, but it is equivalent to $9 per hour and they will not be able to get by on that wage. She agrees that there needs to be pay cuts, not that she wants a pay cut, but sees the need for that, if they want to keep their jobs and the economy going.

 

[Laz]

Years ago in Fort Wayne, union workers refused to lower their wages and benifits for International Harvester which resulted in IH closing and moving out of the city. The South Side of Fort Wayne never really recovered from the closing. Just food for thought.

 

[MarkBarbieri]

2) Count again. There are not 50 Democrates in the Senate and the Republican's have already said they'll fillibuster.

You are technically correct that there are not 50 Democrats in the Senate. However, there are also 2 independents that caucus with the Dems. One is a former Democratic VP nominee (Joe Lieberman) who ran in the primary as a Democract, lost, and then won the general election as an independent. He almost always votes with the Democrats and was even given a committee to chair. The other independent is Vermont's Bernie Sanders. He describes himself as a Socialist. He also caucuses with the Democrats. It is the 51 members of the Democractic caucus in the Senate that give them control. That's why the control all the leadership (Harry Reid is Majority Leader) and all of the committees. They've held control since the 2006 elections.

 

[jodifla]

You are technically correct that there are not 50 Democrats in the Senate. However, there are also 2 independents that caucus with the Dems. One is a former Democratic VP nominee (Joe Lieberman) who ran in the primary as a Democract, lost, and then won the general election as an independent. He almost always votes with the Democrats and was even given a committee to chair. The other independent is Vermont's Bernie Sanders. He describes himself as a Socialist. He also caucuses with the Democrats. It is the 51 members of the Democractic caucus in the Senate that give them control. That's why the control all the leadership (Harry Reid is Majority Leader) and all of the committees. They've held control since the 2006 elections.

You need 60 votes to control the Senate. NOT 50!!!!!!!!!!!!!!!!!!

Geez, didn't anyone pay attention in their American Civics class?

The vote last night was 52-37.....and the bill didn't pass.

 

[MarkBarbieri]

I'm glad that the deal fell through. That leaves $14 billion in the hands of people that will hopefully put it to more productive uses.

Bailing out GM with their existing structure is a waste of money. It won't work. They have far too many workers, brands, dealers, etc. They are bound by contracts that guarantee their failure. Bankruptcy would be painful, but it would allow the new owners to be free of these onerous contracts. It would entail a huge number of layoffs, pay cuts, factory and dealership closings, but that would give them a chance to survive. Pouring more money into them without a radical restructuring is just heading down the path of making them a carmaker version of Amtrak.