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Special> Global Financial Crisis> Latest
UPDATED: December 15, 2008
U.S. Auto Loan Package Dies in Senate
The fate was actually decided well ahead of the vote

A 14-billion-dollar loan package aimed at bailing out the American auto industry from bankruptcy officially died on Thursday night, as it was rejected by the U.S. Senate despite the Wednesday approval by the House of Representatives.

A procedural vote conducted in Senate ended up with only 52 yeas, formally strangling the legislation, whose passage needs 60 supporting votes.

The fate was actually decided well ahead of the vote, as Democrat and Republican senators, who hold 50 and 49 seats respectively, had failed to strike a bipartisan deal on the rescue plan, designed specifically for the so-called Detroit Three , namely General Motors (GM) Corp., Ford Motor Co. and Chrysler LLC.

This is file photo shows new trucks are displayed for sale at a Ford dealership in Encinitas, California November 11, 2008. (Xinhua/Reuters Photo)

Republicans left a closed-door meeting where they balked at giving the automakers taxpayer-funded loans unless the powerful auto union agreed to cut wages next year to the level of those hired by Japanese carmakers, the auto Big-3's top competitors.

Republican Senator George V. Voinovich of Ohio, who is a strong bailout supporter, revealed that the union refused to make the cuts before 2011, as the auto workers' contract doesn't expire until then.

Senate Majority Leader Harry Reid, who was quite optimistic about a Senate consensus earlier in the day, said he was "terribly disappointed" at the failure of the bill.

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

Stressing that the auto industry has a bearing on millions of jobs in the country, Reid added: "Christmas is approaching ...This will be a very very bad Christmas for many people."

GM and Chrysler, which are under a severe strain of cash, have warned that they could be just weeks away from collapse if there is no external assistance. Ford, which said it currently has sufficient money on hand, also hopes to get a line of credit in case its finances worsen.

The three companies employ nearly 250,000 people directly, and 100,000 more jobs at parts suppliers could hang on their survival. The companies also claim that one in every 10 U.S. jobs are related to the auto industry.

"A bankruptcy filing by a major automaker would be catastrophic," commented Craig Cather, president and CEO of CSM Worldwide, an automotive forecasting and advisory service. "It won't be just a Detroit problem or a Michigan problem."

"Many suppliers can't afford another major hit to their production and cash flow. If they are forced to reorganize or possibly even liquidate, that would start a ripple effect that would undermine the health and stability of every automaker in North America," Cather told Xinhua.

And data showed that 58 percent of GM's North American suppliers also supply Asian automakers. The proportions among Chrysler and Ford suppliers are 59 percent and 65 percent, respectively.

"I think some senators have underestimated the backbone role of the auto industry in the U.S. economy," said Kevin Yan, a senior engineer with GM in Detroit, when reached by Xinhua on the phone.

The auto industry helped the U.S. to create numerous middle class members in history, and its collapse will be "disastrous," the 42-year-old added.

The White House, which co-worked with the Congressional Democrats to produce the draft bailout package and was actively engaged in Senate lobbying throughout Thursday, immediately expressed regret over the bill's failure.

"It's disappointing that Congress failed to act tonight," said White House spokesman Tony Fratto.

Earlier in the day, White House spokeswoman Dana Perino warned that the failure of this legislation would be "just something our economy can't withstand at the moment."

According to Kevin Yan, the GM engineer, many of his colleagues are hoping that Congress will work out a fresh bill that is acceptable to both the House and the Senate.

On the unyielding attitude of the union on the proposed wage cut, Yan said the union has its grounds because it had made many compromises in the past. "But I think eventually they will agree to cooperate. Because if there is no more auto industry, there will be no more UAW (United Auto Workers union)."

But the Thursday Senate failure has effectively killed any chance of Congressional action to save the automakers within this year, as the lawmakers are going home for the holiday recesses.

Analysts say that an expedient option now is for the Treasury Department to use part of its 700-billion-dollar financial rescue fund to help the auto sector. However, the Bush administration has insisted that the 700 billion is for the financial industry only and exclusively.

(Xinhua News Agency December 12, 2008)

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