(Update3) Auto Bailout Dies in the Senateby Tim Manni
The Senate rejected the House’s $14 billion proposal to bolster the Big Three through short-term lending Thursday evening. General Motors has repeatedly warned lawmakers that the company could run out of cash before the end of the month. Many experts predict the car companies’ next move will be to try to get funding directly through the Bush Administration, a lifeline that may not require approval from either the House or the Senate.
Disappointed that lawmakers failed to join upon an agreement using “funds already appropriated for automakers,” The White House announced the possibility of utilizing TARP funds to stabilize Detroit’s auto industry this morning. “Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary – including use of the TARP program — to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time,” said White House Press Secretary Dana Perino.
“While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable,” she continued.
Voting 52 to 35, the Senate failed to reach the 60 votes required to pass the legislation. Immediate concerns are mounting for GM and Chrysler, who this week has still reiterated that Chapter 11 bankruptcy is “not a preferred option:”
A top concern is whether jittery suppliers will begin demanding faster payment for parts. Parts makers have already threatened to clamp down. A widespread move to tighten payment terms would imperil GM’s already dire liquidity position.
The auto maker is trying to avoid being pushed into filing for Chapter 11 bankruptcy protection, a move it contends will eventually lead to liquidation because consumers won’t buy vehicles from a bankrupt auto maker.
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.”