Republicans Kill Auto Bailout Bid
 

Senator Christopher Dodd of Connecticut after the vote on Thursday night. Mr. Dodd was among the negotiators working on the bill.

WASHINGTON (By David M. Herszenhorn, NYTimes) December 12, 2008 — The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.

The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.

After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.

The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

“It’s over with,” the Senate majority leader, Harry Reid of Nevada, said on the Senate floor, after it was clear that a deal could not be reached. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

Mr. Reid added: “This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”

The Republican leader, Senator Mitch McConnell of Kentucky, said: “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.”

Mr. McConnell added: “The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work.”

Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and 2 independents in favor. The White House issued said it would consider alternatives but offered no assurances.

“It’s disappointing that Congress failed to act tonight,” Tony Fratto, the deputy press secretary, said. “We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable. We will evaluate our options in light of the breakdown in Congress.”

Immediately after the vote, the administration was already coming under pressure to act on its own to prop up G.M. and Chrysler, an idea that administration officials have resisted for weeks.

House Speaker Nancy Pelosi and other lawmakers called on the administration to use the Treasury’s bigger financial system stabilization fund to but there may not be enough money left to do so. About $15 billion remains of the initial $350 billion disbursed by Congress and Treasury officials have said that money is needed as a backstop for existing programs.

Democrats also immediately sought to blame Republicans for the failure to aid Detroit, while a number of Republicans quickly blamed the union. But on all sides the usual zest for political jousting seemed absent given the grim economic outlook.

“Senate Republicans’ refusal to support the bipartisan legislation passed by the House and negotiated in good faith with the White House, the Senate and the automakers is irresponsible, especially at a time of economic hardship,” Ms. Pelosi said in a statement.

She added: “The consequences of the Senate Republican’ failure to act could be devastating to our economy, detrimental to workers, and destructive to the American automobile industry unless the President immediately directs Secretary Paulson to explore other short-term financial assistance options. Senator George V. Voinovich, Republican of Ohio, and a supporter of the auto rescue efforts, said: “I think it might be time for the president to step in.”

So far, the Federal Reserve also has shown no willingness to step in to aid the auto industry, but Democrats have argued that it has the authority to do so and some said the central bank may have no choice but to prevent the automakers from bankruptcy proceedings that could have ruinous ripple effects.

G.M. and Chrysler issued statements expressing disappointment. G.M. said: We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis.” Chrysler said it would: “continue to pursue a workable solution to help ensure the future viability of the company.”

Earlier in the day, G.M. confirmed that it had legal advisors — including Harvey R. Miller of the firm Weil Gotshal & Manges —to consider a possible bankruptcy, which the company until now has said would be cataclysmic not just for G.M. but for Chrysler and Ford as well. The rescue plan approved by the House on Wednesday by a vote of 237 to 170 would have extended $14 billion in loans to the troubled automakers and required them to submit to broad government oversight directed by a car czar to be named by Mr. Bush.

But even before the House vote, Senate Republicans voiced strong opposition to the plan, which was negotiated by Democrats and the White House. At a luncheon with White House chief of staff, Joshua B. Bolten, they rebuffed his entreaties for support.

On Thursday morning, Mr. McConnell dealt a death blow to the House-passed bill, giving a speech on the Senate floor in which he said that Republican senators would not support it largely because it was not tough enough.

“In the end it’s greatest single flaw is that it promises taxpayer money today for reforms that may or may not come tomorrow,” Mr. McConnell said.

Mr. McConnell, however, held out slim hope for a compromise suggesting that Republicans could rally around a set of proposals by Senator Bob Corker, Republican of Tennessee, who said that the bill did not set stiff enough requirements for the automakers.

Mr. Obama, whose transition team had consulted with Congressional Democrats and the Bush White House on the efforts to help the automakers, used his opening remarks at a news conference in Chicago on Thursday to urge Congress to act.

“I believe our government should provide short-term assistance to the auto industry to avoid a collapse while holding the companies accountable and protecting taxpayer interests,” he said. But in Washington, there was little appetite among Senate Republicans for yet another multibillion-dollar bailout of private companies. Still, with the Democrats and the White House eager to reach a deal, Mr. Corker’s proposal became the subject of intense negotiations well into the evening.

Under his plan, the automakers would have been required by March 31 to slash their debt obligations by two-thirds — an enormous sum given that G.M. alone has more than $60 billion in outstanding debt.

The automakers would also have been required to cut wages and benefits to match the average hourly wage and benefits of Nissan, Toyota and Honda employees in the United States.

It was over this proposal that the talks ultimately deadlocked with Republicans demanding that the automakers meet that goal by a certain date in 2009 and Democrats and the union urging a deadline in 2011 when the U.A.W. contract expires.

G.M. and Chrysler had already agreed to carry out sweeping reorganization plans in exchange for the help.

The negotiations over Mr. Corker’s proposals broke up about 8 p.m. and Mr. Corker left to meet with Republican senators to brief them on the developments. The Republicans emerged from their meeting an hour later having decided they would not agree to a deal. Several of them blamed the autoworkers union.

“It sounds like the U.A.W. blew it up,” said Senator David Vitter, Republican of Louisiana.

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee and a leading critic of the auto bailout proposal, said: “We’re hoping that the Democrats will continue to negotiate but I think we have reached a point that labor has got to give. If they want a bill they can get one.”

The last-ditch negotiations made for a dramatic scene on the first floor of the Capitol, where high-level lobbyists for G.M. and Ford, as well as Stephen A. Feinberg, the reclusive founder of Cerberus Capital Management, the private equity firm that owns 80 percent of Chrysler, gathered with senators and legislative staff in a conference room.

A Democratic aide said that there were no lobbyists present who represented Chrysler.

At times, various participants huddled in corners of the cavernous hallway outside the conference room, shielding their documents and whispering into their cellphones, as a throng of reporters and photographers waited nearby. Some of the lobbyists and banking committee staff members huddled by two towering windows, looking out on a frigid rain that had been falling all day.

Markets reacted quickly in Asia. In Japan, the Nikkei 225 index extended mild morning losses after the proposal failed.