The U.S. Senate rejected an emergency bill to provide billions of dollars of aid to the Detroit 3 carmakers late on Thursday, dashing the hopes of General Motors and Chrysler, both of which may run out of cash by the end of the year.
"We have not been able to get this over the finish line," Senate Majority Leader Harry Reid said after 10 pm, following day-long negotiations to broker a deal among lawmakers, carmakers, unions and other interest groups.
Earlier this week the White House and Congress reached an agreement on most major points of the planned $14 billion rescue package, with only several final issues left to be decided, and yesterday the Democrat lead House of Representatives passed the bill, voting 237-170 in favor of it. However, the process came to a halt because of a dispute over when UAW workers would consent to have their wages reduced to match those paid to non-union workers in U.S. import-brand factories, reports Automotive News.
"We are three words away" from an agreement, said Sen. Bob Corker, R-Tenn., author of a GOP alternative. He said workers wouldn't accept a 2009 deadline for the parity demand.
The rescue package was aimed at propping up GM and Chrysler through March with low-interest loans, while Ford plans to hold-off taking any loans unless its financial situation worsens. The $14 billion was set to come from a fund previously established by the Energy Department earlier this year aimed at making American cars more fuel efficient.
The plan would have also seen a car czar appointed by the President to oversee restructuring programs and ensure that the carmakers follow through with changes that they have promised to the government in return for the loans. If they refused to follow the directions then further federal loans may be withheld or postponed.
Some options include a repeat vote when Congress comes back early next year with new legislation, or the Bush administration could choose to use some of the $700 billion rescue package, known now as Troubled Assets Relief Program, or TARP, funds, earmarked for financial markets. "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," said White House spokeswoman Dana Perino in a written statement.
The U.S. Federal Reserve also has special authority to make emergency loans to almost any economically important entity that can't get credit elsewhere.
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