As mentioned in StupidiNews for today, the auto bailout is officially dead, the final sticking point being
GOP demands that the UAW cut union wages to the level of non-union workers.
Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit’s beleaguered Big Three 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 U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.
Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.
The wage concession was basically meaningless for the continued survivability of the Big Three, designed to drive a stake in the heart of the UAW and kill it. Putting an end to the UAW was the real point of the GOP Senate resistance, and it its zeal to bust the last big union, the GOP is apparently deciding to take out the auto industry and a couple million jobs as well.
Nice guys.
So what's next? As the article mentions, the President can tap the TARP fund to save GM and Chrysler, but Bush could have done that at any point in this mess, and he's refused to so far. He may change his mind after all, a legacy-minded Bush doesn't want to be the President that killed the American auto industry. On the other hand, expecting Bush to be a logical actor in any capacity is foolish given the last eight years.
The most likely outcome is a weekend deal that puts GM and Chrysler in bankruptcy soon.
Still, GM also has said it will lack the minimum $11 billion needed to pay bills by the end of this month, raising the prospect of bankruptcy should it fail to win a cash infusion. GM reported having $16.2 billion as of Sept. 30. An attempt to restructure GM in bankruptcy would end up as liquidation, because sales would plummet as buyers flock to solvent car companies, Wagoner has said.
Chrysler has said it will run out of money early next year. It ended the third quarter with $6.1 billion in cash and needs at least $3 billion on hand to operate, Chief Executive Officer Robert Nardelli told Congress on Nov. 18.
Pressure was mounting on GM and Chrysler this week before the congressional failure as both faced demands from a small number of partsmakers for payments in advance because of the bankruptcy concerns, people familiar with the matter said.
GM is “deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts,” according to a statement. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."
The industry is effectively done at this point, it's either collapse under Bush or nationalization under Obama. GM and Chrysler will not survive bankruptcy, and if both of them go under, Ford will follow.
The ripple effects will be catastrophic. Millions of jobs will be lost as dealerships, parts stores, suppliers and auto mechanics go under. The auto suppliers service several auto brands and manufacturers that share costs. With the Big Three gone, Toyota, Honda, Mazda, Volkswagen and other foreign car companies will have to pick up costs that will be passed to consumers. Those folks will be hurt big time as well.
Obama will have no choice but to fund a massive nationalization project to save the Big Three, and the GOP will blame him for every cent he spends.
Remember that in 2010 if you still have a job in November when you vote.
[UPDATE] Nope, Bush doesn't want to be the goat on this.
The Treasury threw a lifeline to the beleaguered US car industry, saying it is ready to prevent the failure of auto makers until Congress reconvenes next month."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 said.
The announcement came shortly after the White House said it will consider using the $700 billion Wall Street bailout fund to rescue the auto industry after the Senate refused to pass a $14 billion bailout plan late Thursday night.
"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.
The Bush administration has repeatedly opposed using the bailout fund, saying it was designed specifically to restore stability to the financial sector. But the White House said Friday it must reconsider after the Senate failed to agree on rescue plan late Thursday.
Considering the Dow is down less than a percent this morning instead of the meltdown predicted this morning, clearly the market is expecting Bush to step in and float the industry until Obama can act.
We'll see.