White House Weighs Action on Auto Rescue
“Given the current weakened state of the U.S. economy, we will consider other options, if necessary including use of the TARP program, to prevent a collapse of troubled automakers,” White House spokeswoman Dana Perino told reporters aboard Air Force One, according to the Associated Press.
The Treasury Department also signaled it was ready to act to shore up automakers in the wake of the legislative breakdown.
“Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,” Treasury spokeswoman Brookly McLaughlin told news agencies.
The Dow Jones industrial average was down slightly in the first hour of trading Friday morning. Asian markets reeled on the news, with exchanges across the Asia-Pacific region down more than 3 percent on the development, and Japan’s Nikkei average and Hong Kong’s Hang Seng both down more than 5 percent.
The stalled rescue package bill was designed to buoy General Motors Corp., Chrysler LLC and Ford Motor Co. by extending up to $14 billion in emergency loans and other measures and create a “car czar” to oversee how the Big Three handled promises to innovate and restructure.
The measure finally collapsed in the Senate late Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to pass the measure before the end of the year.
In a break with President George W. Bush, Republicans refused to support providing aid for the auto giants without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with non-union workers at U.S. plants that build Japanese cars.
The bill, which was the product of tough negotiation between congressional Democrats and the White House, appeared to be virtually dead on arrival in the Senate, where Republicans said it was too weak in its demands on the car companies and also contained unacceptable environmental mandates for the Big Three.
GM and Chrysler have said they are weeks from collapse. Ford says it does not need immediate federal help now, but its survival is far from certain.
“It’s going to be very difficult for them not to file for bankruptcy,” Erich Merkle, consultant at Crowe Chizek in Grand Rapids, Mich., told Reuters of GM and Chrysler if they did not get help.
The main sticking point for Republicans appeared to be the UAW’s refusal to agree to wage cuts.
“We were about three words away from a deal,” said Sen. Bob Corker of Tennessee, the GOP’s top negotiator, referring to any date in 2009 on which the UAW would accept wage cuts.
“We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves,” said Sen. Mitch McConnell, R- Ky., according to the New York Times.
Majority Leader Harry Reid, D-Nev., 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.”
“This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight,” Reid added.
Some Senate Democrats joined Republicans in turning against the House-passed bill — despite calls from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.
Pressure quickly turned to the White House, as Democratic leaders urged President Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.
“It has now fallen to the president to take action,” said Sen. Carl Levin, a Michigan Democrat who has spearheaded efforts to get help for Detroit.
Sen. Christopher Dodd, D-Conn., who led much of the negotiations on the bill, said it was also possible Congress could take a “second crack” at a rescue when lawmakers reconvene in January.