Information Security & US & Life & Love & Fashion & Hacking & Passion

Last-ditch efforts to forge an agreement to rescue the U.S. automakers fell apart late Thursday, Dec. 11, when union officials refused fast and deep cuts in worker pay. The collapse created the real possibility that General Motors (GM) and Chrysler will face bankruptcy in a matter of weeks, unless the Treasury Dept. acts to prevent it.

Senate Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor Thursday night that a refusal of the United Auto Workers, headed by Ron Gettelfinger, to agree to lower wages and benefits at parity with workers at Toyota (TM) and Honda (HMC) in the U.S. by a date certain in 2009 was the last sticking point preventing Republicans from supporting the bill.

"We were three words away from a deal," said Senator Bob Corker (R-Tenn.), who spent all day trying to broker an agreement between Republicans, the union, and the auto companies. Tennessee is home to a GM and Nissan (NSANY) plant, as well as a future Volkswagen (VOWG.DE) plant and several supplier facilities.

Officials from the UAW did not return phone calls at press time.

"It's disappointing that Congress failed to act tonight," the White House said in a prepared statement. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

"A Loss for the Country"

The Senate rejected the bailout 52-35 on a procedural vote after the talks collapsed.

Senate Majority Leader Harry Reid (D-Nev.) called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

The bill called for $14 billion to be divided between GM and Chrysler, both of which are at the financial breaking point as the recession and consumer credit crunch have crippled their finances. The companies, anticipating failure in the Senate, have hired bankruptcy law firms. Ford (F) has said it doesn't need federal assistance now but has asked for a $9 billion line of credit in case sales deteriorate below the current level.

According to Corker, bond holders that conferred with lawmakers Thursday agreed to take a 70% writedown on debt they hold from the automakers, and to take half of the remainder in stock. GM has $42 billion in debt, not counting payments the company must make to the union's health-care trust in 2010. As part of the deal, the UAW also agreed to take half of its future $21 billion in payments to its health-care fund in stock. "The companies would have been stronger than they have been in 40 years, or headed for Chapter 11," said Corker.

Senator Debbie Stabenow (D-Mich.) took a harsh and emotional tone with Republicans who voted against the bill. "Evidently the only thing that matters to those on the other side of the aisle is that workers make too much money," she said.

Unionized autoworkers are a favorite scapegoat for the problems facing U.S. automakers. Their job security guarantees and gold-plated benefits have surely cost General Motors, Ford Motor and Chrysler a bundle over the past few decades. Indeed, the domestics' historically high labor costs are among the reasons they haven't been able to compete with Japanese rivals, and why Detroit CEOs were back on Capitol Hill again Thursday asking for $34 billion in taxpayer loans to survive.

But the U.S. automakers probably would have collapsed by now if not for the concessions made by the United Auto Workers union over the past three years.

Once bitter enemies, the Detroit Three and the UAW have long since buried the hatchet and are now working together to close the wage gap with Toyota (nyse: TM - news - people ), Nissan (nasdaq: NSANY - news - people ) and Honda (nyse: HMC - news - people ) through various productivity improvements and more flexible work rules, for instance.

The union has made some major concessions. Two biggies last year: The UAW agreed to cap the cost of retiree health care through creation of an independent trust fund and agreed to cut wages in half, to $14 an hour, for new hires in non-assembly jobs (20% of the workforce). More concessions came this week when the union agreed to end a controversial "jobs bank" program, which pays workers even when there are no vehicles to build. The union also said it would allow car makers to extend their scheduled payments to the health care trust fund. Importantly, UAW President Ronald Gettelfinger also said the union is ready to renegotiate additional contract terms.

Now, the playing field is just about level--or will be once the economy recovers.

Despite the collapse of Lehman Brothers, Richard Fuld can still negotiate a deal. For example: taking home $20 million on $13.5 million worth of sold art.

It's not nice to say, but if GM collapses, it could be a good thing for some companies, states and workers.

I do not expect General Motors to shut its doors this month, next month or any month in the near future. Instead, I fully expect our Federal government, lame duck Congress or "new duck" Congress will write the checks to keep GM in business--at least for now.

It seems fair to ask what would happen if taxpayers do not rescue General Motors (nyse: GM - news - people ). I suspect that if Americans had a vote, they would turn down GM. The truth is that our people now buy more cars with foreign nameplates than with American nameplates. Another reality: Parts of the country would prosper if GM fell.

Of course, a GM collapse would be bad news for GM workers who would lose their jobs. Factoring in all the layoffs already planned and those to come, I estimate the number would be close to 75,000, with most of those job losses in Michigan and other Rust Belt states with GM plants. As far as the pensioners go, GM's pension fund is huge; those people would get their pensions, and retirees would get Medicare like the rest of us, instead of health benefits from a GM plan.

The scaremongers like to talk about 3 million jobs lost, all things considered, which means not just the factory and white-collar workers of the auto company but the parts suppliers, dealers, repair garages and hot dog stands outside the factories.

These same people continually remind us about the lost tax revenue, which might mean fewer pay raises for teachers and school administrators and hospital workers in the Rust Belt. These are politically terrible thoughts--the teachers' union and the medical workers' union are among the largest contributors to political campaigns.

My opposing viewpoint: An end to GM would not be the end of the world. We are not going to have to walk to work. Other manufacturers will build our cars and trucks. In fact, business will grow for the other carmakers.

GM sells 20% of the vehicles in America. Today's depressed market is on pace to sell about 12 million vehicles a year in the U.S., which means GM sales of 2.4 million. That is about 10 new assembly plants the others would need to build to replace the lost GM vehicles. Every car plant in the North America would have to run overtime to make up for the shut GM plants.

PETIONVILLE, Haiti (CNN) -- Authorities have detained the owner of a Haitian school that collapsed, killing at least 84 students. Meanwhile, rescue workers continue to comb through the rubble in search of survivors.

Fortin Augustin, who owns College La Promesse Evangelique in Petionville, surrendered to authorities on Saturday, police spokesman Garry Desrosier told The Associated Press.

Desrosier said Augustin has not been charged. He is currently being detained at a police station near Port-au-Prince.

As many as 700 children were on the school grounds, celebrating the school's birthday when the building collapsed about 10 a.m. Friday ET, said Abel Nazaire, deputy coordinator of Risk and Disaster Management in Port-au-Prince.

By Saturday night, 150 people had been injured, but many more remained missing, Nazaire said.

Officials said it has not been easy to determine how many people were inside the building at the time of the collapse. Watch CNN reporter describe the scene »

"Yesterday (Friday), there was a special event at the school, so there were not only pupils, but family members and friends who were invited," said Rob Drouen, a spokesman for the International Committee of the Red Cross. "It's very difficult to say how many people were in the school."

Most of the students at the school ranged in age from 10 to 20, officials said, but some are younger. Haitian press reports said kindergarten, primary and secondary students attended the school.

Amelia Shaw, a journalist with United Nations TV who visited the scene, said the second floor of the building crumbled onto the first. Haitian President Rene Preval has said the structure of the three-story school building was "really weak" and called for a review of construction guidelines.

International aid crews continue to sift through the wreckage in search of survivors.

Earlier Saturday, rescue crews pulled out several children alive, prompting cheers and reviving hope among parents. Since then, there had been no signs of life. Watch how search for survivors can be painful »

Rescuers discovered the bodies of 20 children and their teacher in a classroom.

"Throughout history, there's been people found 48, 72 hours later -- still alive, in good shape," said Michael Istvan of the U.S. Agency for International Development (USAID), one of several agencies helping with the recovery effort.

Rescue workers punched holes in the concrete and sent down cameras looking for signs of life. A crane lifted chunks of concrete, while dogs were brought in to help with the recovery effort.

Officials said one of their biggest concerns is the vibrations from the power generators. They said too much vibration can shake loose pieces of concrete on the damaged hillside structure, sending them tumbling down and causing more casualties.

Today Edward Liddy, AIG’s new CEO, announced what the troubled insurance company is putting up for sale, and it’s a lot. Other than the company’s US property and casualty businesses, and its international general insurance business (companies with a combined annual revenue of about $40 billion) most everything is on the block. He is hoping to retain a majority interest in the company’s top notch international life insurance business as well.

He wants to do big deals and do them quickly, in a bid to pay off the expensive bridge loan the company got from the New York Federal Reserve two weeks ago. AIG has already pulled down $61 billion of the $85 billion offered, at an interest rate currently around 12.5%. The company is also paying 8% interest on the balance it has not drawn down.

In his first conference call with investors, Liddy fielded a good numbmer of questions about why the company didn’t put the Fed deal to a vote of shareholders. Many analysts concluded their exchanges with the CEO with a wistful “Good luck.” Clearly it’s a tough market to be selling anything especially with lending so restrained.

But Liddy’s tone was unrelentingly businesslike and matter of fact. He promised in conclusion to be in better touch with them than perhaps the company had been in the past. “A strong viable and nimble AIG will emerge from this crisis,” Liddy promised. He encouraged investors to think of the Fed deal as an essential lifeline and one that would have suffered for waiting days or weeks for a shareholder vote.

One of the thorniest issues for AIG is the one that brought is to its knees in the first place: the rapid rise in collateral it has had to post to cover credit default swaps. Most of the $61 billion drawn down, Liddy said, has done to its securities lending arm, AIG Financial Products, “in round numbers $53 or $54 billion,” he said. “I liken it to filling up a bathtub, you fill up initially and then it starts to slow down.” Though he did clearly say AIG expects to borrow more from the Fed, he didn’t say how much. When asked if he might have to go back for more than $85 billion, Liddy said he never likes to say never, but that they hoped to borrow as little as possible. He noted that an analysis by Blackrock of these deals showed that even under the worst case thought possible, the “intrinsic value is significantly above where we have those market. The question is can we retain some of the upside?” And that’s a question Liddy can’t answer.

For Liddy and his managers the biggest challenge right now is keeping the various companies operating at a high level and that means keeping people. As of today some know they will be leaving the mother ship no matter what. “Certainty is better than uncertainty,” said Liddy. “So by declaring today what businesses are a part of us going forward and which are not, at least it lets people know where they sit.” Just to be sure they stay seated, he’s put in place “a full array of retention agreements and enhanced severance agreements. “For many reasons, for our people and our policy holders, selling the businesses to brand name companies, with strong ratings, strong balance sheets, and well capitalized, that is a key.”

These businesses could be game changing for the buyers who get them he notes, and he says he’s heard from dozens of interested parties already.