A frantic, last-ditch attempt to forge a relief package for the auto industry collapsed in the U.S. Senate, dealing a giant blow to the immediate hopes of the Big Three.
Senate Majority Leader Harry Reid of Nevada suggested the $14 billion wouldn't be revisited until January. "It's over with," he said.
The talks, which appeared close to a deal several times, broke off due to a sharp partisan dispute over the wages paid to workers at the manufacturing giants.
After a marathon day of negotiations, top Democrats appeared close to a deal that would toughen the bailout package in a bid to raise Republican support, which had proved an insurmountable stumbling block. The focus of talks was on seeking commitments to restructure the industry's debt load and bring labor costs in line with wages paid by Toyota Motor Corp. and Nissan Motor Co. in the U.S., among other things.
But those talks fell apart after Republicans insisted that wages reach parity in 2009. Sen. Bob Corker (R., Tenn.), who emerged as a pivotal player this week in negotiations over the industry's future, said negotiators were close to striking a bipartisan compromise.
Democrats were willing to reach parity, but not on such a swift timetable. Mr. Reid declared talks at an impasse. "We have not been able to get this over the finish line," he said. "We have worked and worked...that's just the way it is."
This is without a doubt one of the most insane gambits possible. In case the Republicans have forgotten the general economic backdrop, let's rehash the facts. According to the BLS:
Nonfarm payroll employment fell sharply (-533,000) in November, and the unemployment rate rose from 6.5 to 6.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. November's drop in payroll employment followed declines of 403,000 in September and 320,000 in October, as revised. Job losses were large and widespread across the major industry sectors in November.
The most generous reading of the employment numbers for the latest expansion is that 7.2 million jobs were created. Over the last three months we've lost 17.44% of those jobs. Continued weekly unemployment claims are at multi-year highs:
The economy is officially in a recession and has been since December 2007.
The committee identified December 2007 as the peak month, after determining that the subsequent decline in economic activity was large enough to qualify as a recession.
And yet, at a time when the US economy cannot withstand another shock the Republicans have decided that is exactly what they want to do. Instead of helping Detroit out the Republicans have decided to screw the country in the name of ideology. Here is what I wrote about the bail-out earlier this week:
Here's my basic opinion. I have spent a fair amount of time criticizing lampooning the US auto industry. All three companies are run by people who give the word idiot a bad name. And the fact the head of Ford made $50 million over the last 2 years indicates the Board of Directors is just as stupid (I am sure he's not alone -- I just happen to know that number off the top of my head). And no -- this is not the unions fault. The problems rest squarely with management -- you know, the people who are supposed to run the company.
What the auto execs are basically doing right now is using their employees as hostages. At any other time in economic history a bankruptcy the size of GM or Ford would lead to a quarter of negative US growth followed by a resumption of 3%+ growth (maybe two quarters, but you get the idea). Unfortunately, right now the economy cannot afford a bankruptcy of that size without running the risk of that particular event leading to a major and prolonged downswing. It would be like throwing a boulder into a puddle -- the puddle will probably disappear.
That being said, I am an incredibly reluctant supporter of the bail-out, not because I think it's a good idea but because letting a US car company go bankrupt would be an incredibly bad idea. As a result, I would attach a ton of conditions to the money. For example, mileage standards would have to improve big-time. The big three's reliance on the SUV business model would go bye-bye. Executive compensation would have to be cut until the companies showed a profit (personally, I would propose a package and then subtract the total compensation for the last 5 years for the Board of Directors and Executives from the package total because these guys clearly didn't earn that money). Major financial cuts at all levels would happen. That means executive fly coach and rent compact cars on business trips. Downsizing from a physical plant and personnel perspective is a must. Simply put, the car companies would still have to face major restructuring. It's simply unavoidable at this point; the US auto industry would look very different when this is all said and done.
As I mentioned above the situation is pretty simple: the US economy cannot take the shock of a GM and/or Chrysler bankruptcy. It's just not in the cards. And yet, that's exactly what these idiots are proposing because in their esteemed judgment that's what is best for these companies and the country. Remind me again why people think Republicans are good with economics?
I want to add this correction: In August 2003 there were 129,822,000 establishment jobs in the US. In December 2007 there were 138,078,000 for a total gain of 8.2 million. That means the total job losses over the last three months represent 14% of all jobs created during the last expansion. I wrote the column from memory and lost 1 million people. I apologize for the mistake.