Auto Bailout Negotiations Fail in Senate, Reid Says

Dec. 11 (Bloomberg) -- Senate negotiations for a U.S. automaker bailout plan collapsed, in a blow to General Motors Corp. and Chrysler LLC, which may run out of cash early next year.

“It’s over with,” Majority Leader Harry Reid said on the Senate floor in Washington. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

The Senate began taking a procedural vote on a House-passed plan, though Reid said he didn’t expect it to get the required 60 votes.

“Millions of Americans, not only the autoworkers, but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted,” said Reid. “It’s going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”

Asian stocks and U.S. index futures immediately began falling after Reid’s comments. The MSCI Asia Pacific Index slumped 2.2 percent to 86.13 as of 12:33 p.m. Tokyo time, while March futures on the Standard & Poor’s 500 Index slipped 3.4 percent.

Connecticut Democrat Christopher Dodd, who helped lead the negotiations, said the final unresolved issue was a Republican demand that unionized autoworkers accept a reduction in wages next year, rather than later, to match those of U.S. autoworkers who work for foreign-owned companies, such as Toyota Motor Corp.

“More than saddened, I’m worried this evening about what we’re doing with an iconic industry,” Dodd said. “In the midst of deeply troubling economic times we are going to add to that substantially.”

Republican Bob Corker of Tennessee, who negotiated with Dodd, said, “I think there’s still a way to make this happen.”

Earlier today, White House spokeswoman Dana Perino warned that an agreement was necessary for the U.S. economy.

“We believe the economy is in such a weakened state right now that adding another possible loss of 1 million jobs is just something” it cannot “sustain at the moment,” Perino said.

Also earlier, South Dakota Republican John Thune suggested that if talks collapsed, the Bush administration might aid automakers with funds from the financial-rescue plan approved by Congress in October.

“I think that is where they go next,” Thune said. “I wouldn’t be surprised if they explore all options.” The Bush administration thus far has opposed that option, which was favored by Democrats.