Autos: To bail or not to bail?
"The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.
"The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.
"After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.
"The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy."
This morning, the White House is sending out signals that it may be willing to use TARP funds after all to bail out the automakers. That has helped lead to a spike in stock market futures. But the harsh reality is that the economy is still in awful shape. We just learned this morning, for instance, that retail sales dropped 1.8% in November, a record fifth month in a row of declines. That means there are going to be large capacity cuts, wage concessions, and massive layoffs at GM and Chrysler whether they reorganize in or out of the bankruptcy courts.