Without Union Concessions, Bankruptcy Better Than A Bailout, Republicans Say

December 12, 2008 - 7:33 AM
Republicans leaders said they want the U.S. auto industry to survive and thrive, but they also insist that a multi-billion-dollar taxpayer loan is not the only option. There's also federal bankruptcy protection.

In this Oct. 30, 2008 file photo, Ford assemblymen mesh the engine to the drive shaft of a 2009 Ford F150 truck at the Dearborn Truck Assembly in Mich. The Senate killed a $14-billion package to help struggling U.S. automakers on Dec. 11, partly because the UAW would not agree to wage cuts. (AP Photo/Carlos Osorio)

(CNSNews.com) – Congressional Republicans blocked consideration of a $14-billion federal loan for the auto industry Thursday night.
 
Republicans leaders said they want the U.S. auto industry to survive and thrive, but they also insist that a multi-billion-dollar taxpayer loan is not the only option. There’s also federal bankruptcy protection.
 
According to the Associated Press, the deal stalled over the United Auto Workers’ refusal to agree to wage cuts before their current contract expires in 2011.
 
The auto bailout bill, which easily passed the House on Wednesday, failed to advance in the Senate Thursday night. Fifty-two senators voted to consider the bill, but 35 of them (31 Republicans and 4 Democrats) voted against consideration. Supporters needed 60 votes for the bill to advance.
 
Democratic leaders pounced: Senate Majority Leader Harry Reid (D-Nev.) said he “dreads” looking at the stock market on Friday: “It’s not going to be a pleasant sight,” he warned. “This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight,” Reid said.
 
Earlier, the AFL-CIO accused Senate Republicans of trying to kill the bill “to satisfy their anti-union blood lust.”
 
But Senate Republicans insist it’s wrong to ask American taxpayers to “subsidize failure.”
 
Senate Republican leader Mitch McConnell (Ky.) said Americans are worried about the government intervening on behalf of some industries and not helping others – “especially when there is no guarantee that the interventions will work.”
 
The bailout legislation wasn’t nearly tough enough, McConnell said in remarks on the Senate floor: “A primary weakness relates to the so-called ‘Car Czar,’ who has nearly unlimited power to allocate taxpayer dollars but limited ability to force the kinds of tough concessions that long-term viability would require,” McConnell said.
 
Republicans wanted the United Auto Workers union to make more concessions on labor costs.
 
But McConnell said the plan’s greatest flaw is “that it promises taxpayer money today for reforms that may or may not come tomorrow. And we would not be serving the American taxpayer well if we spent their hard-earned money without knowing with certainty that their investment would result in stronger, leaner auto companies that would not need additional taxpayer help just a few months or weeks down the road.”
 
“We simply cannot ask the American taxpayer to subsidize failure,” McConnell added.
 
McConnell also drew a distinction between the financial industry bailout and the auto bailout: While the financial rescue plan approved by Congress in October was intended to rescue the entire economy, the auto bailout is intended to save a single industry, he said.
 
“A failure to appreciate this distinction has caused a number of other industries and even a number of municipalities across the country to prepare their own proposals for a government rescue as all Americans weather the tough economy. It has also created the impression in some minds that the federal government is picking favorites, and that favored businesses get help while others don’t.”
 
McConnell said the simplest reason to oppose the bill is also the best reason: “A government big enough to give us everything we want is a government big enough to take everything we have,” he said.
 
Republicans insist that a government bailout is not the only option for the car companies. There’s also bankruptcy and restructuring, a path favored by Sen. Jim DeMint (R-S.C.).
 
“Government should not be in the auto industry,” DeMint told the National Review Online. “We’ve set up laws to deal with companies that are financially strapped, and we’ve got bankruptcy protection under Chapter 11, which would allow them to restructure their debt and their union contracts under the authority of a bankruptcy judge, who could help them make the hard decisions that would create a sustainable business.”
 
DeMint pointed to the airline industry as an example of an industry that has “gone through the bankruptcy process and come out the other side.”  He told NRO the American people would have more confidence in buying a General Motors product if they knew the company was reorganizing under bankruptcy protection, rather than “being propped up by the federal government.”
 
According to the Associated Press, U.S. automakers are now counting on the White House to give them some of the $700 billion approved by Congress to bail out the financial industry. Following the Senate vote, the White House said it was studying its options.
 
General Motors and Chrysler have warned they could run out of cash before Christmas.
 
But President Bush opposes using the congressionally authorized financial industry bailout funds for emergency loans to the automakers.
 
GM said in a statement it was "deeply disappointed" that the bailout bill has faltered. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said in a statement.
 
Chrysler also aid it was also disappointed and would "continue to pursue a workable solution to help ensure the future viability of the company."