Bailout Bill Fails To Pass Through Senate
After passing in the House of Representatives, the Big Three bailout bill failed to pass through the Senate this evening. To further complicate things, this matter will not be revisited until the new Senate takes their seats next year.
In lieu of this, General Motors is reportedly seeking the assistance of bankruptcy advisors and the folks at Chrysler have evidently already made arrangements for Chapter 11 counsel. News of the bill failing to go through has already affected Global markets, with the Nikkei index dropping over 6 percent as of this writing. We don't expect things to be too pretty on the New York Stock Exchange, either. This comes as bad news for many Americans, and Senate Majority Leader Harry Reid has agreed that this will be "a very, very bad Christmas."
How do you feel about the bailout not passing? Let us know your thoughts and opinions, in comments.
+ Autoblog: Repercussions of failed automaker bailout spreading quickly
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Comments
Anonymous
Finally. Someone is getting their due for trying to pass horrible products and gross mismanagement, and we all hopefully won't have to foot the bill for their idiocy!
chartguy
I'm a libertarian, but I have to hand it to the Republicans on this one. They actually called the union's bluff.
It's not the automakers who are bankrupt, it's the ideology of the unions. The bailout bill would have briefly bailed out the unions. Until the cost of their labor is competitive, the industry that they work for will not be competitive.
Now if the Republicans had been willing to stand up to Wall Street, and Goldman Sachs in particular, I'd be much happier today.
Anonymous
From the numbers I've read the union only accounts for about 10% of GM expense. If the union disappeared and all union work was done by free robots, GM would still go bankrupt. It is clearly the GM that is bankrupt.
Maybe they shouldn't have wasted many billions on Fiat, or Saturn, or Saab, or many of their other brain dead ideas.
oollyoumn
Fiat is a good example of a ginormous management mistake. GM spent billions to get controlling interest in Fiat, but then had to spend billions more to get out of the deal. But now Fiat is doing great. I guess Fiat got a GM bailout, and they don't have to repay it. Wagoner should be so clever.
Ducati Minor
I stumbled upon this by hitting the wrong bookmark. What a way to ruin a late-night porn frenzy. Thanks Firefox.
I'll hand it to Bob Corker for killing this. He was clever: he grabbed the spotlight on Capitol Hill and used that to redirect attention to the UAW, which has refused a proposed wage cut--demanding to wait until 2011.
I supported the bailout bill because the UAW avoided major blame from the general press and, more importantly, the actual economic outcome of this. Bankruptcy will have implications for Detroit's products and investor activities on Wall Street. How low will the Dow go?
Back to the bill's demise.
The rejection has now turned to the UAW, which refused a sensible decision: wage cuts. Even though labor has been partially blamed for high wages and legacy costs, there hasn't been a finger pointed at the union. There's a difference between blaming labor (a general term) and the United Auto Workers.
Chapter 11 may preserve the capitalist aspect of these companies and build real reform--but maybe not. I cannot see Chrysler surviving on its own unless it downsized to Subaru level. GM has to let go of half its brands here. Ford claims it's doing better, but who really knows.
Maybe Detroit's fall may mean the return of the independent carmaker. Surely, the State would help it out if there's no other choice.
Goose
Well: I hope the Senators from Toyota, Honda, and Nissan are proud. Wait 'till they find out them Southern Interloper factories can't build anything with the supplier chain crippled! :D
I'm not much for unions, but I dare say "They Did Their Part" a while ago: Going after them for more was just stupid.
Americans apparently don't deserve a native auto indastry . . .
[Chuck Heston]You Maniacs! You blew it up! Ah, Damn you! God Damn you all to Hell![/Chuck Heston]
AnonAmercun
You people just don't get it or obviously aren't going to be losing your jobs this Christmas. I hope you are proud of yourselves and feeling very smug. The auto industry does not affect only the unions and CEOs. Thousands of jobs rely on the auto industry including parts manufacturers, suppliers, contractors, restaurants, local stores, local economies. So the heads of GM, Chrysler and Ford have their heads in the sand, but the Republicans who voted against the loan failed horribly to see the bigger picture - the already failing economy.
I and many others will be ultimately be losing my job soon as a result of this. I am not a CEO, I am not a Union employee, I did not build these cars. I did nothing wrong. My family I support did nothing wrong.
The people who work for suppliers in my town will soon be laid off and factories closed because of the failed bailout, our little local economy will probably collapse. It all trickles down to the little guy. Did you actually believe that this would hurt the CEOs at all? Are you really that thick and vengeful that you simply cannot see the big picture?
Well, anyways, Thanks for wishing me and my family ill will even if it was vicariously. I hope you are happy with yourselves. Merry X-mas.
HINDC
GM stopped buying from my employer a couple of years back, I don't remember any sympathy from you. I don't know of any business we have with Chrysler. We are still a supplier to Ford. I would have plenty of sympathy for Ford's employees if they were in GM's or Chrysler's situation.
TheStig
You should be directing those comments to the ones who ran the corporations into the ground through gross mismanagement.
GiMa
I guess we will see if Bush was bluffing. He was strongly against any money coming from the TARP fund, but favored the bailout loans. There is some irony in that his hand is being forced by his own party.
But this may be a blessing for GM. The quickest and cheapest way for GM to close thousands of dealerships and several divisions is through bankruptcy. They should take advantage of situation and close Pontiac too.
It has long been the American way to dig yourself in too deep, then renege on your commitments through bankruptcy.
As for as jobs lost, there will be many lost with or without taxpayer money. The idea that UAW jobs will be largely saved by a bailout is a myth.
The cost is another deception. The automakers had asked for $34B, and their supporters say the alternative could be for times that cost, but industry experts have repeatedly warned that this is just the start, and that it will likely take more than $100B to keep these companies out of bankruptcy.
Another interesting fact, Autoline Detroit reported that about 60% of UAW members are against the bailout. Evidently even they don't think it is a good investment of their money.
The Vinnie
Basically there are 20 to 30 hours spent in building a vehicle . Even at 50$
an hour that's at the maximum 1500$ per vehicle . Why is all the focus on the autoworkers ??? Look at the Harbor Report--direct labor in the auto industry is highly competative.
About a few things that I have personal experience.
GM counted on its size and market share to commit numerous errors , remember
-the Vega
-the 305's with soft camshafts
-the "moved to Mexico" production of V-8's with cracks in the bottom of the V
-the 2.8's that blew up at 60,000 miles (GM paid 5300$ plus 5 weeks of
car rental to repair my wife's '85 Pontiac 6000 STE )
-the late start-up of Saturn (that alone should have meant Chapter 11}
-the 3.4's with leaky gaskets/manifolds
Management is out of touch
Like to be insulted--take your GM in for service
Like to be ignored--ask about a certain model at a GM dealer
Like to hear hubris---listen to GM executives
The car business is about 3 things --product ,product and product
GM hired a senior as their "car guy"--great thinking
Good luck to all the autoworkers whose labor is under-appreciated
chartguy
The Vinnie,
I'm afraid that you don't have your facts right. GM and the UAW themselves say that health-care expenses alone average $1,500/car. That "$50/hour" is about what the Japanese are paying (wages AND benefits).
In 2006, average hourly cash compensation at GM was $39.68/hour, but that doesn't include benefits. Average hourly labor costs (what GM pays) were $73.26 per hour.
Even that figure understates the costs. The UAW contract requires that everyone, from the guy mowing the lawn to the janitor to whoever, be UAW and get in the queue (and pay union dues). They also have very unrealistic work rules, that mean that many more workers are hired than are needed, and that pay workers as much as 90% of their salaries NOT to work.
The ultimate test is what happened. When the UAW heard it would have to make immediate, real concessions to get the bailout passed, they chose not to support the bailout. It's the UAW that's broken. They're desperately clinging to a wage structure that is driving the big three bankrupt.
The cars are good cars. They're just too expensive for what you get, and that's because the UAW labor cost is too high.
The Vinnie
Chartguy ,
There are GM vehicles on local dealer lots with a MSRP of 36,600$ on the window sticker and a hand-written paper on the dash with the "new" price of 25,600$ . Can't see how the the UAW is responsible for the vehicles being "expensive" when GM can offer that kind of discount . Plus there is still profit at 25,600$ .
UAW gave up raises and contributes to a Supplementary Unemployment Benefit Fund (usually same dollar amount as manufacturers) so that laid off workers get more than the regular UI benefits . This was done years ago to address the cyclic nature of auto production and the long down time required for plant change-overs. It is not a free ride .
I have visited over a dozen car plants and over 200 auto part plants .The "unrealistic work rules and many more workers than are needed"
are to my observation pure and simple urban myths . No workforce is more competative than autoworkers .
Just this morning ,Sat the 13th Dec , the UAW President again announced that they were willing to meet with and negotiate with the Detroit Three. He also repeated that labor is less than 10% of the COST of a car . If anyone wants results , then look at the other 90% !!
Anonymous
It looks like s deal with SAIC (Chinese) is all but certain to take Saturn off GMs hands. It's not clear how long this deal has been in the works, GM has tried to peddle Hummer for a relatively long time with no bites.
I doubt SAIC is interested in Saturn for it product line, since it is all shared with other GM brands, but it would be a quicker way to get a dealer network started.
Maybe Fiat will buy Saab. They have express a strong desire to reenter the US market.
Rod Panhard
The question of bailout is no longer about GM and Chrysler. It's about politics. Any rational thought that may have been involved has probably left the room.
We've heard a lot of conjectures about the economy and what will work and won't work to save it, during the last three months. And so far, much of that has been recanted. At this point, we don't know who is right, or who is wrong.
For every economist who says, "Bailout GM and Chrysler or we'll plunge into depression" there's one who says, "That's not true." One economist opined that if GM goes under, then New Jersey's pharmaceutical companies will take a huge hit. Does this mean that people will stop taking their medicine that insurance pays for, and then get sicker and die? I doubt it, but if so, we should all start investing in funeral homes.
So what it comes down to, is gambling. Does anybody feel lucky? Apparently, nobody feels like gambling with $34 billion, but some feel like gambling with $15 billion.
VII
I say we do it the American way (the TV one) and 'go big or go home!'......oh wait, all the homes are foreclosed. Guess we have to do it the REAL American way and think about saving our own asses and the asses of those that will save our asses...and continue to go down this road towards destruction. Hm...Politics.
~TheDarkWind
mo
It is really hard to say if that is good or bad. GM has been scoring looses for quite a while. I agree with Chartguy, the cars are not bad, but there is always a factor that puts them behind the competetion. Management is also horrible. Would 15 billion be enough to make buick and pontiac appealing? If I am a CEO at GM I would suggested buick and pontiac in the history books long time ago. non of these two brands has its unique charecter and they overlap with chevy and caddy, which are having better times at the moment.
About chrysler, I seriously don't know what CEOs over there are doing. The cars are a almost 5 years behind. I took the new Journey around today and I was shocked how bad it is. The steering was giving me false feedbacks sometimes. ESP interferes early, and when it does (especially on one of the front tires) you feel the break pedal is jolting. I was teaching my cousine how to make a burnout with a FWD (since it is super easy), and I forgot to turn the ESP off, the pedals and the front end was shaking in a creapy way. I couldn't believe this was a 2008 model. The yaris I rented 3 years ago was better overall from what I was driving today.
So, would 15 billion be really enough to save the big 3? if not, and if bankruptcy would open more choices for the american automakers (like to dump buick and pontiac), then I think that is better for everyone. All I hope is whatever happens would make American cars better and more competetive in the future.
Charles
If Mercedes, and other auto companies were in such great shape, why did Sen Shelby state of Alabama give millions for them to locate their?
The same holds true for South Carolina whose Governor Mark Sanford is a critic of the bailout but his state gave millions to BMW to locate their!
They did this in better econocomic times, plus most of the money does not have to be paid back! It is not a loan like the Detroit 3 need in this bad economic times!
Plus it would be insteresting to see how much aid they supported in their states for USDA Freebees and other wasteful projects that are businesses as well!
VII
Hope for the future!! (albeit quite a small bit of said hope) Too bad people woke up late and allowed the banking bailout first... >_>
~TheDarkWind
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News of the failed bill has already spread to markets across the Pacific, with the Nikkei index nose-diving over 6%. Things on this side of the world are bound to be worse when trading on the New York Stock Exchange begins tomorrow.According to reports, General Motors has got bankruptcy and restructuring advisors on speed-dial in preparation for the bad news and Chrysler has already retained CH11 counsel.The White House called congressional inaction a breakdown and said it would evaluate its options.
Rosie - Toronto Lawyers
Yes, this world wide crisis has not the best impact on cimpanies, and I hope the the government understands it perfectly and will act in the way that will be more helpful for big producing corporations...
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