U.S. Senate Kills Auto Bailout Package

The U.S. Senate yesterday killed the proposed bailout package for the Big 3 automakers.

The package worth 14 billion U.S. dollars was rejected in a 52-35 procedural vote. Ten Republicans joined 40 Democrats and two independents in backing the bill, but were well short of the 60 required.

The Republicans opposing the rescue package came up with a compromise bill demanding that the United Auto Workers accept wage cuts to Japanese levels. The negotiation stalled over the date on which the union would accept the cuts.

UAW refused to agree to steep pay cuts until after its contract expired in 2011.

Right after the collapse of the negotiations, Senate Majority Leader Harry Reid said, “I dread looking at Wall Street tomorrow,” adding he hopes President George W. Bush signs the 700 billion dollar bailout into law to support the auto industry.

White House Deputy Press Secretary Tony Fratto expressed regret over the collapse of the negotiations, and said the White House will seek measures to resolve the issue.

Of the 350 billion dollars Congress authorized out of the 700 billion dollars for bailout, only 15 billion dollars are left. The Bush administration has refused to dole out more money for the auto industry.

With the Senate’s rejection of the bill, the fate of auto giants GM, Ford and Chrysler hangs in the balance.

The bill’s failure also caused stock prices across Asia and Europe to tumble. Korea’s benchmark KOSPI index tumbled 50.61 points, or 4.38 percent, to close at 1,103.82. The tech-heavy KOSDAQ finished down 8.42 points, or 2.56 percent, at 320.07.

Japan`s Nikkei dropped 5.56 percent and China’s Shanghai Stock Exchange fell 3.81 percent.

Stock markets in Europe also fell four to five percent in early trading yesterday.

higgledy@donga.com jefflee@donga.com