The US Senate rejects loans to Chrysler, GM and Ford

Yesterday we reported that the House of Representatives had given the green light to the rescue plan for the three automakers; however, it still had to be voted on in the Senate. And that is where it has failed, due to the 8 votes that were missing to reach the 60 needed to approve it (with 38 votes against), and because of the opposition of some Republicans who were not in favor of the financial aid.

One of the points of disagreement, which contributed to the failure of the vote, was the wages of the workers. The Republicans wanted the manufacturers to cut their employees’ salaries to the same level as those of other companies such as Toyota in a short time. This was completely rejected by the unions, whose position was to accept a salary reduction but only starting in 2011 and not immediately.

However, the main issue that the voters against it did not see clearly was whether this financial loan would actually produce truly satisfactory results, so they did not see it as a safe investment.

From here on, the initial plan no longer has a future, so there is talk of turning to an alternative one. A solution that seems to have potential is the one proposed by Republican Senator Bob Corker, under which manufacturers would be required to pay off their debts before 31 March 2009 and approve the salary reduction to bring them in line with those of other manufacturers. We will comment on this plan later.

As for the next steps of the manufacturers, each one has its own particular situation. General Motors is asking the government for an urgent loan to get through to March and to finish the year somehow, while also considering more short-term solutions. Ford claims it is the one with the fewest problems because its liquidity can still sustain it and could withstand one of the other groups declaring bankruptcy. But Chrysler unfortunately does not have enough money even to finish the year. This group and GM have already hired lawyers who would help them go into bankruptcy.

The consequences of this serious situation extend to the stability of workers’ jobs and to the situation of unpaid suppliers. The failure of the aid has also been felt in the stock market indices, which have fallen several points.

There is no doubt that this will be one of the toughest Christmases for people connected to the automotive industry in North America, and it will surely change the paradigm that has existed until now in that region. We will keep you informed of any developments in this regard.

Source | Autoblog en Español