Auto bailout talks collapse over union wage cuts

WASHINGTON -- A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

Senate Majority Leader Harry Reid said he was "terribly disappointed" about the demise of an emerging bipartisan deal to rescue Detroit's Big Three.

He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese car makers.

Republican Sen. George V. Voinovich of Ohio, a strong bailout supporter, said the UAW was willing to make the cuts -- but not until 2011.

Reid was working to set a swift test vote on the measure Thursday night, but it was just a formality. The bill was virtually certain to fail to reach the 60-vote threshold it would need to clear to advance.

Reid called the bill's collapse "a loss for the country," adding "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

The implosion followed an unprecedented marathon set of talks at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

Sen. Bob Corker of Tennessee, the GOP point man in the talks, said the two sides had been close to a deal, but the UAW's refusal to agree to wage concessions by a specific date in 2009 kept them apart.

The autoworkers' contract doesn't expire until 2011.

"We were about three words away from a deal," said Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."

Familiar territory

The breakdown was reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by President Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected.

Congressional Republicans revolted against a version that the Bush White House negotiated with congressional Democrats and the House passed on Wednesday.

The talks centered on wage and benefit concessions from the UAW as well as debt-restructuring by General Motors Corp., Ford Motor Co. and Chrysler LLC, and officials from the union and companies participated in the talks at one point or another.

Alan Reuther, the UAW's legislative director, declined to comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.

Efforts to stitch together a rescue package for the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

"There's a lot of hardship out there. People are losing their jobs, losing their homes, losing their cars and losing their patience," said Reid, D-Nev. "We don't need to pile on."

It was unclear how far the participants were willing to go to seal the federal aid that General Motors and Chrysler said was essential to keep them from bankruptcy. Ford is in better financial shape than its rivals, although its survival is not assured, either.

The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to the White House-backed rescue bill passed by the House on Wednesday.

He and other Republicans said wages and benefits for employees of Detroit's Big Three should be renegotiated to bring them in line with those paid by Japanese carmakers Toyota, Honda and Nissan in the United States.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.

GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package and the Senate dropped it from its package.

The negotiations marked the latest development in a long-running debate over bailing out the beleaguered auto industry. The issue gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

The White House monitored the talks but was not directly participating. Administration officials had been deeply involved in recent days in drafting a compromise with House and Senate Democrats -- the measure that McConnell and other Senate Republicans promptly repudiated.

Some Senate Democrats joined Republicans in turning against the House-passed bill -- despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

The White House said President George W. Bush was calling Republican lawmakers, while Obama told reporters at a news conference in Chicago an industry shutdown would have a "devastating ripple effect" on the already ragged economy."

The House-passed bill would create a Bush-appointed overseer to dole out the money. At the same time, carmakers would be compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.

McConnell said that measure "isn't nearly tough enough."

Pushing to convert skeptics in both parties, Democrats agreed to drop at least one unrelated provision that threatened to sink the measure, a congressional official said. They were eliminating a pay raise for federal judges after Democratic Sen. Claire McCaskill of Missouri, who represents an automobile manufacturing state, announced she would oppose the carmaker aid unless that provision was removed.

Supporters had an uphill battle pressing the rescue package on a bailout-fatigued Congress -- particularly a measure designed to span the administrations of a lame-duck president and his successor. Before the late-day negotiations, patience had begun wearing thin at the Capitol as lawmakers looked ahead to adjourning for the holidays.

Reid at one point called for swift separate votes Thursday on compromise legislation backed by Democrats and the White House as well as the GOP proposal. "We have danced this tune long enough," he declared.

But with Republicans staunchly opposed to the rescue and some Democrats ill or absent from the emergency, postelection congressional session, bailout supporters acknowledged that getting the needed 60 votes to pass either would be very difficult.

The House approved its plan late Wednesday on a vote of 237-170. Supporters cited dire warnings from GM and Chrysler executives, who have said they could run out of cash within weeks.

A pair of polls released Thursday indicated that the public is dubious about the rescue plan.

Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.

In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.

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Associated Press writers David Espo and Alan Fram in Washington and Kimberly S. Johnson in Detroit contributed to this report.