Stocks have ended a choppy day mixed as investors remain uncertain that a $17.4 billion lifeline for automakers will make a lasting difference for the beleaguered industry.

The Dow rose by as much as 182 points in the early going, turned lower at midday, recovered in the afternoon but then lost ground again in the last hour of trading.

Investors are relieved that the White House's efforts have staved off a bankruptcy that could have sent a blow to the economy, but they're worried that the conditions of the financing might be difficult for GM and Chrysler to meet.

At the close, the Dow is down about 25 points to the 8,579 level. The broader Standard & Poor's 500 index and Nasdaq composite index are up less than 1 percent.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

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.

Suze Orman will be a guest on Larry King Live Tuesday.

She is a well-known personal finance expert, and host of The Suze Orman Show on CNBC.

Suze’s commentary is a Larry King Live Blog exclusive.

Last week I watched the CEOs of the big three automakers testify before Congress. Testify is being kind, as what they really seemed to be doing was begging for money. All because their companies refused to invest in what they had to know was true, for more than 20 years.

Those supposedly smart CEOs that you are programmed to believe are smarter than you, didn’t follow the simple law of making choices that are based on fact, on what is known. We have known for years that oil is a limited commodity, yet Detroit did not aggressively pursue higher fuel efficiency (and don’t get me started on the fact that Congress didn’t exactly push them in that direction). They saw their competitive edge erode to foreign car manufacturers, yet they didn’t manage their business to adapt to that competition. And in the process they turned off their main client: Americans, who refused to support products that they now judge to be of inferior quality.

They saw the marketing surveys; they knew they were losing ground to the competition, yet it sure doesn’t seem like they made the massive changes necessary to reinvent themselves for an evolving auto industry.

Yet, I firmly believe that as incompetent and clueless as they were, now is not the time to let the Big Three fail. We as a nation can’t afford the impact of all the lost jobs: both those employed directly by Chrysler, Ford and General Motors, and the millions more whose livelihood is linked to the industry.

Yes, we should all be mad and annoyed that we have to bail out these companies that have been run with an indifference to tackling what is known. My hope is that at the very least, any federal aid will come with serious requirements, oversight and regulations. What is needed is that these CEO’s finally get their heads out of the sand and make the known changes that have always been needed and start running these companies like this is 2008 not 1958.

In the meantime, as I was watching the Congressional hearing I was thinking about you, and how my wish is that you act far more intelligently than the auto CEOs this holiday season. I hope that you have the fortitude and foresight to make choices based on what you know is true today.

• You know you need to build an emergency savings fund that can cover six to eight months of living expenses; so you and your family will be okay if you are laid off.
• You know you need to get serious-finally-about tackling your credit card debt, because you understand how a high unpaid balance can mean big trouble in 2009.
• You know you need to invest more for retirement to have any shot at living comfortably later in life.
• You know you need to sit down with your child and discuss how much you can honestly afford to cover for college

If you honestly know all that, you will not spend money on holiday shopping that should instead be used to build financial security. If you know all that, you will take actions based on what you know so you never have to turn to anyone for a bailout (as if you could get one). Stop looking up to the CEOs of the world as if they are smarter than you. If they are so smart, why have they run their companies into the ground? I want better for you and your family. Focus on what you know you have to do to build security and you will give your family the most wonderful gift of all.

Happy Holidays.
– Suze

Ten spots where folks have enough money for everyday expenses, and 10 where daily budgets eat up a sizable chunk of incomes.

Detroit automakers hoping for a government lifeline got it Friday night when Speaker of the House Nancy Pelosi said she would support a $15 billion loan from a fund already approved by Congress aimed at retooling factories to make fuel-efficient vehicles over the next several years.

Pelosi had been against the measure, bolstered by environmental advocacy groups. Opponents were concerned that automakers would use the money for normal operations and not deliver on requirements to develop vehicles that are at least 25% more fuel-efficient than the ones they market today.

But with job losses mounting in the U.S., many members of Congress are feeling pressure not to let the automakers go bankrupt even though most of their constituents do not favor a bailout for Detroit.

CASCADING BANKRUPTCIES POSSIBLE
Estimates are that if one automaker went into insolvency, it would cause a cascade of bankruptcies in the auto sector that could cost up to 3 million jobs. The U.S. lost more than 500,000 jobs in November alone.

The funds that would be tapped for the car companies were appropriated in the 2007 energy bill, and were meant to be disbursed by the Energy Dept. over time as each automaker qualified for the loans. "We will not permit any funds to be borrowed from the advanced technology program unless there is a guarantee that those funds will be replenished in a matter of weeks," said Pelosi (D-Calif.). How that would be accomplished is still under debate.

It was clear on Friday, after two days of hearings in front of the Senate Banking Committee and House Financial Committee, that Congress did not have the votes to appropriate new funding for a Detroit bailout, especially during a lame-duck session.

ENCOUNTERING "BAILOUT FATIGUE"
Over the last month, Congress, the public, and the media have been highly critical of the way the Treasury Dept. has overseen payouts to commercial and investment banks from the $700 billion Wall Street bailout package Congress passed in October. Representative Barney Frank (D-Mass.), chairman of the House Financial Services committee, said the public has "bailout fatigue."

Despite the intent of the package, which was to loosen lending to businesses and consumers, the credit markets remain tight. Banks have used the money for other functions, such as dividend payments, salaries, and even, in some cases, executive bonuses.

The automakers came to Washington asking for $34 billion, on top of the $25 billion loan package that was part of the energy bill. General Motors (GM) said it needed $4 billion by the end of the year to avert a financial meltdown, and Chrysler requested $7 billion, saying it would be at the minimum cash levels it needs to survive by the New Year. Chrysler on Friday retained a law-firm that specializes in Chapter 11 bankruptcy.

VOTE LIKELY THIS WEEK
Ford (F), in a better cash position, said it could likely weather the recession in 2009 without loans, though it asked for a $9 billion line of credit as an emergency fund. Executives with knowledge of the negotiations on Friday said Ford would probably not tap the loan money Congress is likely to approve next week.

Originally, Congress said it would meet Monday to vote on a bill if one came together. The vote will now take place later in the week, assuming the language of the bill is worked out to Pelosi's liking.

Chairman of the Senate Banking Committee Christopher Dodd (D-Conn.) has maintained that the Bush White House and Treasury have had the power to release funds from the $700 billion Wall Street fund. That assertion was backed up by the Federal Comptroller last week during hearings. But the White House has argued that the bill cant be interpreted to help automakers.

LONG-TERM RESTRUCTURING REQUIRED
Congressional Republicans have also signaled for a month that the only money they would vote to the automakers would be from the energy bill fund already appropriated.

The bill that Congress is expected to vote on next week is meant to give Congress time to work out a longer-term restructuring of the U.S. auto industry with the Obama Administration that will likely result in as much as $100 billion in loans being appropriated.

That money would come from either new legislation, or a combination of funding sources including the Wall Street bailout fund, $350 billion of which Obama's White House will administer. An auto industry "trustee" is likely to be appointed to regulate the payout of the money and how it is spent.

GREATER OVERSIGHT OF AUTOMAKERS
But all that help won't come without sacrifice. Company management will have to agree to tight oversight. They also will be forced to drop any opposition they have mounted in recent years to tighter fuel economy and emissions regulations. The United Auto Workers will likely have to make greater wage and benefit concessions for workers and retirees. And bond holders will likely be compelled to either write down as much as two-thirds of their investments or swap the debt for equity in the car companies.

Several Capitol Hill staffers on Friday said they also believed the government would probably try and facilitate a consolidation of GM and Chrysler, which had been talking about a merger two months ago before their financial conditions so drastically worsened.

U.S. automakers drew fresh skepticism from lawmakers Thursday in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive. Congressional analysts said one bailout plan under consideration would fall short of what the carmakers want.

With time on the current Congress running out, opposition to the bailout appeared to be as strong as last week - before Detroit's Big Three auto chiefs returned to Capitol Hill with more detailed plans on how they would spend the money.

Several lawmakers in both parties are pressing the automakers to consider a so-called "pre-packaged" bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Big Three have publicly shunned the notion, saying it would kill sales by destroying customers' confidence - but executives have indicated in recent days that it might ultimately be necessary.

The executives all agreed in Thursday's hearing that a multibillion-dollar bailout deal would include a supervisory government board that could order major restructuring of the companies if deemed necessary for survival - similar to the results in many reorganizing efforts under bankruptcy law.

United Auto Worker union President Ron Gettelfinger, aligned with the industry in pressing for the aid, told senators at a Banking Committee hearing that any kind of bankruptcy, even a pre-packaged one, was not "a viable option." Gettelfinger said consumers would not buy autos from bankrupt companies, no matter the terms of the arrangement.

He also warned that in the absence of action by Congress: "I believe we could lose General Motors (nyse: GM - news - people ) by the end of this month." He said the situation was dire and time was of the essence.

The Big Three CEOs told the senators they hoped to make amends for past blunders. "We made mistakes, which we're learning from," General Motors chief executive Rick Wagoner said. Ford CEO Alan Mulally also acknowledged big mistakes, saying his company's approach once was "You build it, they will come."

Members of Congress wanted Detroit's Big Three automakers to redo their homework before they resumed begging for a government bailout today. So how'd they do?

It doesn't matter. If a Senate Banking Committee on the matter Thursday was any indication, the failure of America's automakers poses such a danger to the economy that lawmakers seem less focused at this point on whether they'll give the automakers a bailout, and more so on how they'll do it.

"We're not going to leave town without trying," committee chairman Sen. Christopher Dodd, D-Conn., said of their efforts to provide funding for General Motors (nyse: GM - news - people ), Ford Motor (nyse: F - news - people ) and Chrysler.

That augurs well for GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli as they prepare for day two of hearings before the House Financial Services Committee Friday. But by no means should the Big Three, their suppliers, dealers or the United Auto Workers union breathe a sigh of relief. If there's any group that can kick around ideas and take no action on them, it's Congress.

Still, for advocates of a bailout, the horizon is less cloudy than it was at the beginning of the week. For one thing, not a single witness at Thursday's hearing opposed the idea of a government bailout, though Mark Zandi of Moody's Economy.com, who was also on the panel, says he believes the companies will need $75 billion to $125 billion to avoid bankruptcy--not the $34 billion they have requested.

In addition, the automakers are all open to various propositions put forth by the senators Thursday. The most popular of these is the idea of a government oversight board or trustee to manage the bailout, akin to the group that handled the government bailout of Chrysler Corp. in 1979 and 1980.

They're also agreeable to an idea put forth by Sen. Bob Casey, D-Pa., to subject the auto companies to monthly benchmarking so the government can ensure the money is being used as it sees fit. The Big Three are fine with having the Fed regulate their financing arms and another body (probably the oversight board) regulate the manufacturing companies. And they're on board with the idea of giving taxpayers the most senior position when it comes to repayment of the loans, though Ford has a slight complication with this because the company has already mortgaged all of its assets. Nonetheless, Mulally says "there must be a way" to work around this dilemma.

Detroit automakers laid out their worst-case business scenarios for Congress Tuesday, asking for up to $38 billion in taxpayer loans to survive the economic crisis and turn their companies around.

General Motors (nyse: GM - news - people ) is seeking up to $18 billion, Chrysler wants $7 billion and Ford (nyse: F - news - people ), which says it doesn't need a loan at the moment, is asking for a $9 billion line of credit--perhaps as much as $13 billion--in case the economy worsens.

The requests, filed Tuesday on Capitol Hill, were accompanied by extensive details of how the automakers plan to reduce labor costs, streamline products and restructure their balance sheets in order to return to profitability.

Chief executives from each of the companies will answer questions about their viability plans when they appear before Senate and House committees later this week.

America's carmakers have been steadily downsizing for years in an effort to become more competitive with foreign-based rivals. But the crisis that has brought at least two of them--GM and Chrysler--to the brink of bankruptcy is an opportunity to take more drastic measures.

Indeed, GM said it would cut its current stable of brands from eight to four--dumping Saturn, Saab and Hummer, and paring back Pontiac to a few niche models. GM also expects to reduce the number of dealers from 6,450 to 4,700 by 2012.

GM also plans to close nine powertrain, stamping and assembly plants in the U.S. by 2012, and reduce its total U.S. employment to between 65,000 and 75,000, from 97,000 today.

Chinese automaker Geely reported sales for October dropped 7.4% from last year.

As China's economy boomed during the past few years, dozens of Chinese companies jumped into the car business, setting up factories to produce autos for the growing middle class. Thanks to those new automakers, many of them backed by local governments, today there are more than 100 Chinese auto manufacturers with a combined production capacity of over 9.6 million vehicles, according to Changjiang Securities. Problem is, Chinese purchased only 8.8 million vehicles last year, according to official figures.

Now, with the global credit crisis cooling China's economy, demand for cars is growing even weaker. Growth in auto sales is expected to be just 5% this year, compared with 22% in 2007, estimates the China Passenger Car Assn. On Nov. 11, Geely reported sales for October had dropped 7.4% from last year. Last month, SAIC Motor reported quarterly profits dropped 78%, to $38 million; the Shanghai automaker's stock price has dropped 78% this year, compared with a 62% fall in the Shanghai stock index.

With sales in the doldrums and investors shunning their stocks, some of the leading Chinese automakers are taking a page from General Motors (GM), Ford (F), and Chrysler's handbook and calling for China's government to support the auto industry. However, talk of a bailout seems to be wishful thinking. Beijing failed to include any measures to help the industry in the $586 billion stimulus package announced earlier this month. And most of the largest automakers in China, including Dongfeng Automobile, SAIC Motor, and Tianjin FAW Xiali Automobile, are still profitable.

No Life Preservers

That's why the government seems to be taking a hands-off approach. It's not providing assistance to the country's automakers, but it's not forcing a much needed consolidation, either. "It's not like in the U.S. where they are going to get a lot of help with their business," says Henry Li, head of exports at BYD Auto in Shenzhen, which has halved its 2008 export target to 10,000 vehicles in light of the crisis. "The government does not provide financial support. The only thing they can do is help organize fairs to increase domestic consumption."

With an eye on long-term sustainability, Beijing is encouraging the auto industry to develop more fuel-efficient cars. For instance, in September the government raised the consumption tax on luxury cars, which had been 20%, to 40%. Chen Jianguo, deputy head of the industrial coordination department at the National Development & Reform Commission, said earlier this month that the government was considering slashing the sales tax, which accounts for one-tenth of a car's price, on alternative-energy vehicles to boost demand. Beijing is also likely to levy a gas tax, offsetting a possible fall in gasoline prices, in a step toward allowing the market to set prices instead of the state.

Congress to Detroit: What's Your Plan?

If the Big Three automakers can't come up with a radical plan that will satisfy Congress, they can kiss the $25 billion bailout goodbye

By David Welch

After going to Capitol Hill and begging for a $25 billion bailout, the three chief executives of General Motors (GM), Ford (F), and Chrysler have been sent away with a request for a "plan" by members of Congress. And if they want to get the taxpayers' money they so desperately need, they had better come up with something good.

The problem is, there's not a lot they can say that Congress, specifically Senate Republicans, wants to hear.

Many people, inside and outside the industry, believe the Big Three need to make wrenching cultural and strategic changes if they are to survive. One is former Treasury Secretary Paul H. O'Neill, who sat on the GM board from 1993 to 1995. "This is not going to work," O'Neill says, "unless there is 100% change [in Detroit]."

Which brings us to the question: How can government give Detroit a bridge loan while ensuring that the companies do more to be competitive? While the automakers offered nothing new in Washington, GM sources say President and Chief Operating Officer Frederick A. "Fritz" Henderson has talked almost daily with United Auto Workers President Ron Gettelfinger, discussing different things the two sides can do to cut costs. For its part, Ford says it can last into later next year, and Chrysler has been seeking a buyer.

UAW Calls for Concessions

In the meantime, government, labor, and the automakers need to come up with a plan that Congress will buy. Otherwise, bankruptcy is a possibility. If that happens, buyers would be turned away and revenue would plummet, Henderson said in an interview on Nov. 18.

But here's the tricky part. According to one Big Three lobbyist, Democratic congressional leaders don't want a plan that slashes jobs and cuts union benefits. Republicans think that's a great idea. With no clear direction from Washington yet, here's what a smart bailout package might look like. Let's start with the union. There's no question the UAW has made huge concessions over the past three years. The union cut more than 100,000 jobs and agreed to a new $14-an-hour wage for new workers (half the rate of veteran employees), as well as a health-care deal that will make GM much more competitive with Toyota (TM). Detroit will reap that savings mostly in 2010.

But there's a big problem. None of the companies can hire new workers because they have to retire the veterans first. Plus, sales are too low to justify new hiring so none of them have been able to realize the savings, says Henderson. For GM, he says the company can find its breakeven point even at sales rates as low as 11 million or 12 million vehicles a year, but it will take time and any new action must be negotiated.

To see these companies through to 2010—and send the message to Congress that management and the union are serious about helping to build the bridge—the UAW could agree to cut to Toyota-level pay and lower benefits at least until the loans are repaid. The good news is that UAW chief Gettelfinger indicated at a news conference on Nov. 20 that he'd be willing to do something. "The UAW is at the table," he said. "We welcome all stakeholders to make concessions."

White-Collar Perks Under Scrutiny

So the union is prepared to make cuts if Congress demands it. UAW workers in domestic plants make $29 an hour while Toyota workers make at most $25.