UPDATE: Senate dumps relief package bid
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It will likely be a long, cold winter for GM as the Senate denied an automaker loan proposal Thursday night.
Both Chrysler and GM have questioned whether they would be able to make it through the month.
Senate Republicans turned down the $14 billion proposal approved by the House on Wednesday, and 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, according to the New York Times.
"This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight,” Senate Majority Leader Harry Reid was quoted as saying.
Media reports throughout the day have depicted finger-pointing between Sen. Bob Corker, R-Tenn., and United Automobile Workers President Ron Gettelfinger. There is still a chance that money may be used from the previously approved $700 billion financial bailout package to aid automakers.
In related news, General Motors Corp says it is slashing its first-quarter North American production by 60 percent compared with the same period this year, in response to a collapse in U.S. vehicle demand.
GM said on Friday it will cut production by an additional 250,000 units during the first quarter due to "ongoing and severe drop in industry sales."
GM had announced on December 2 that it would produce 600,000 units in North America in the coming quarter, compared with 885,000 in the 2008 first quarter.
The National Automobile Dealers Association expressed dismay at the Senate's decision."NADA is very disappointed that Congress failed to pass legislation to stabilize the auto industry," says NADA Chairman Annette Sykora. "We are encouraged, however, by today's statement from the White House that it will consider use of the TARP (Troubled Asset Relief Program) 'to prevent a collapse of the troubled automakers.' We agree with the White House that it would be 'irresponsible to further weaken and destabilize our economy.' Failure of an automaker would have a domino effect on dealers and suppliers. Bankruptcy would further threaten the availability of credit for dealers for consumer purchases and financing the vehicle inventory on their lots."
Suppliers dismayed
The Motor & Equipment Manufacturers Association (MEMA) expressed its dismay and disappointment as the Senate did not secure the votes necessary to pass financial assistance to the automotive industry. MEMA had urged the Senate to support the legislation in hopes of preventing a major vehicle manufacturer bankruptcy and the feared chain reaction throughout the supplier industry.
"Valuable domestic manufacturing jobs throughout the United States are at immediate risk and it is too easy now to envision the further damage that our economy will suffer," says Bob McKenna, MEMA's president and CEO.
McKenna repeats what was stated in a letter sent Thursday to all Senators: the supply base is the common denominator among all vehicle manufacturers and that domestic car manufacturers share 58 to 65 percent of their suppliers with Asian manufacturers and 37 to 46 percent with European manufacturers in North America. "There is simply no way that a vehicle manufacturer bankruptcy will not cause further bankruptcies and extraordinary hardship within the supplier industry."
Kenna acknowledged the difficult issues facing Senate negotiators and urged the Administration to now allow funds from the TARP to be used as a bridge loan to the auto companies. "This industry is too important to the economic health and well being of the nation to be left to fail," McKenna says. "The fate of domestic manufacturing and hundreds of thousands of jobs are hanging in the balance waiting for action."
Stay tuned for more in-depth coverage of this story.