WHAT HAPPENS NEXT?…. OK, so Senate Republicans appear to have killed the rescue package for the automotive industry. What’s the next move? There are a few possibilities.
* Try again in the new year: The Wall Street Journal reports that Harry Reid believes the bailout can be brought back in January. GM and Chrysler have said they won’t last that long, but it’s unclear whether that’s true or not.
* Try again sooner: The Asian markets fell quickly in response to the news from Capitol Hill, and U.S. markets are likely to do the same. What’s more, one or two of the U.S. auto manufacturers really may start the bankruptcy process, making the prospect of economic damage more tangible. The WSJ notes that there’s at least some chance that Congress “will act sooner if one of the companies totters on the brink.”
* Suspend operations in Detroit: GM is shutting down operations for two weeks over Christmas, and USA Today reports that GM and Chrysler could save money by just shutting down completely until Obama takes office on Jan. 20. The move is exceedingly risky: “The automakers would have no revenue during that time even if cars sell, because they book revenue when vehicles are shipped to dealers. Shutting operations that long also could devastate suppliers. Because they supply domestic and foreign-owned plants, the impact would ripple through the industry.”
* Treasury intervenes: The NYT notes that Democrats are looking to the administration to “use the Treasury’s bigger financial system stabilization fund,” but there may not be enough money left. “About $15 billion remains of the initial $350 billion disbursed by Congress and Treasury officials have said that money is needed as a backstop for existing programs.”
* The Fed intervenes: The NYT also reports, “So far, the Federal Reserve also has shown no willingness to step in to aid the auto industry, but Democrats have argued that it has the authority to do so and some said the central bank may have no choice but to prevent the automakers from bankruptcy proceedings that could have ruinous ripple effects.”
We’ll see what happens.