WASHINGTON — An eleventh-hour effort to salvage a proposed $14 billion rescue plan for the auto industry collapsed Thursday night as Republicans and Democrats failed to agree on the timing of deep wage cuts for union workers, killing the legislative plan and threatening America’s carmakers with bankruptcy.
“We’re not going to get to the finish line. That’s just the way it is. There too much difference between the two sides,” Senate Majority Leader Harry Reid, D-Nev., announced after 10 p.m., concluding a marathon negotiating session that ended in gridlock. Reid warned that markets could plummet when trading begins this morning.
“I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight,” he said.
After dire warnings earlier in the day that prospects for a bailout had all but disintegrated, the high-stakes talks had initially produced significant progress. Senators and their aides had spent more than eight hours trying to reach a last-minute deal, exiting the talks after 8 p.m., hopeful that a deal could be reached.
“Nothing is agreed to until everything is agreed to,” said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, emerging from the marathon session after 8 p.m. Dodd said there had been agreement on “some issues but not all of them.” Senate staff members retreated to their chambers to come up with final language for the bill.
Dodd and Sen. Bob Corker, R-Tenn., the most junior member on the banking panel, had led the talks with representatives from Detroit’s Big Three automakers and the United Auto Workers union.
The negotiations were based on a plan advanced by Corker. His proposal sought to reduce the wages and benefits of union workers by requiring the automakers’ total labor costs to be “on par” with those in nonunion U.S. plants of foreign automakers such as Toyota and Honda, according to a summary of the bill. The proposal would have required automakers to reduce their debt obligations by at least two-thirds through an equity swap with bond holders. Payouts to workers who are laid off or temporarily furloughed would be terminated.
Entering a critical meeting of Senate Republicans to present a revised version of the plan Thursday night, Corker said one “major” issue separated the two sides. Industry sources indicated that the sticking point related to how deep wages would be cut.
The group came close to agreement, but it stalled over the UAW’s refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.
The House passed an auto bailout Wednesday night. But the proposal, brokered by the Bush administration, ran into strong GOP opposition in the Senate and forced negotiators to craft a new deal.
The Senate version likely would have been considerably different from the one passed by the House. Because that chamber has already gone into recess, House Speaker Nancy Pelosi, D-Calif., would have to call lawmakers back into session next week to vote on any new proposal.
The Senate talks came as President-elect Barack Obama urged passage of a bailout to spare GM or Chrysler from having to file for bankruptcy protection, a prospect that has grown real enough for both firms to hire lawyers to deal with such a scenario.
It wasn’t clear whether GM could survive until January if Congress failed to reach a deal. Its chances of acquiring federal loans would be significantly improved with the new legislature because the Democratic majority will likely be large enough in the Senate to defeat any GOP filibusters attempts.
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