Senate leaders try, but fail, to salvage aid for carmakers

By David Lightman | McClatchy Newspapers

WASHINGTON — The U.S. Senate's effort to rush emergency aid to Detroit's ailing automakers collapsed Thursday night, as negotiators were unable to agree on how to curb labor costs.

"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," a clearly dejected Majority Leader Harry Reid, D-Nev., told the Senate after negotiators spent more than six hours in closed-door talks, trying to broker a deal.

"It is disheartening, to put it mildly, we were unable to come to an agreement," said Senate Banking Committee Chairman Christopher Dodd, D-Conn., who led the effort.

Foes were unapologetic. "Bailouts generally don't work and this is a huge bailout," said Sen. Richard Shelby, R-Ala., top committee Republican.

The House late Wednesday had passed a measure, crafted by Democratic congressional leaders and the White House, to provide $14 billion in emergency loans to the Big Three automakers. General Motors and Chrysler are said to be close to bankruptcy, while Ford, though in need of a line of government credit, doesn't need the money immediately.

Most Senate Republicans, led by Minority Leader Mitch McConnell of Kentucky, balked. They objected to government bailouts of specific industries, and some thought that bankruptcy would be a preferable option.

"None of us want to see them go down," McConnell said Thursday night, "but very few of us had anything to do with the dilemma they created for themselves."

Reid realized early Thursday that he couldn't win enough votes to stop procedural delays aimed at derailing the House bill, so Dodd had been talking behind closed doors with United Auto Workers union officials and Sen. Bob Corker, R-Tenn., about a compromise.

They were said to be close — Corker said the negotiators were two or three words away from a deal.

There was little disagreement on two of Corker's points: That companies would be forced to cut outstanding unsecured debt by at least two-thirds, and health and benefit plan funding would get half their scheduled payments in company stock.

However, the negotiators became stuck over labor issues. Corker wanted American auto company workers to earn the same as those who work for foreign-based manufacturers.

"There was no debate ... we ought to achieve parity on wages and benefits," Dodd said. "The issue was the timing of it."

Republicans wanted the change to take effect next year, but Sen. George Voinovich, R-Ohio, said the union was willing to make the change in 2011.

That clash "was the whole potato," said Sen. Pete Domenici, R-N.M.

All around Washington and the political world, supporters of the measure were worried about the consequences of the collapse.

"I'm afraid this country is going to be in deeper, deeper trouble," Dodd said.

"Shame on us if we cavalierly walk away and think we can do this another time. . . . This is about whether or not we're going to make a commitment to the middle class and a commitment to American manufacturing," added Sen. Debbie Stabenow, D-Mich.

Earlier in the day, White House spokeswoman Dana Perino warned that the economy "is in he economy is in such a weakened state right now that . . . another possible loss of 1 million jobs is just something our economy cannot sustain," she said.

In Chicago, President-elect Barack Obama joined the chorus, saying an industry collapse "would lead to a devastating ripple effect throughout our economy."

The White House and Democratic congressional leaders had spent days negotiating a rescue package that would create a "car czar" appointed by the president with authority over loans and company restructuring.

The plan won easy passage in the House, but in the Senate, where 60 votes are needed to cut off debate, many of the 49 Republicans were concerned that the loans would only prop up faltering companies, which would then seek more money next year when a friendlier, more Democratic Congress and Democratic president will be in office.

They also had strong philosophical objections. "There's a group of Republicans who don't care what anyone says; they're willing to let the companies go into bankruptcy," Voinovich said.

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