NEW YORK The drive to rescue U.S. automakers bogged down in partisan disputes on Wednesday and economies shed jobs around the world as China reported a shocking slowdown and Europe's recession deepened.
The House of Representatives neared a vote on whether to provide up to $14 billion in bridge loans or lines of credit that would carry struggling automakers through March 31. In return, carmakers would give the government an equity stake equal to 20 percent of whatever is borrowed.
But some congressional Republicans threatened to slow or block the plan and even some who support help for Detroit could not guarantee enough Republican votes in the Senate to get it passed. The White House said it did not expect to complete a deal with Congress on Wednesday.
The bankruptcy or failure of General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) or Chrysler LLC CBS.UL would threaten not only jobs but also billions of dollars of financial instruments, experts said, raising the prospect of another credit crisis like the one that has pushed much of the world into recession.
"A collapsed U.S. auto industry would lead to defaults on over $1 trillion in corporate bonds, credit default swaps and other financial instruments," Michigan Democratic Sen. Carl Levin said in a statement provided to Reuters. "Another grenade would be tossed into our credit markets."
The Dow .DJI closed 0.8 percent higher and the S&P 500 .SPX ended up 1.2 percent as a rebound in oil prices and other commodities lifted energy, mining and materials shares, offsetting nervousness over prospects for a Detroit bailout. European stocks .FTEU3 ended flat after Japanese shares .N225 closed 3.2 percent higher.
JOBS LOST, OUTPUT SHRINKS
The corporate world was still shedding jobs in response to dwindling demand. Global miner Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) said it was eliminating 14,000 jobs, and Sweden's SKF (SKFb.ST: Quote, Profile, Research, Stock Buzz), the world's biggest bearings maker, announced 2,500 job cuts.
One survey saw the U.S. economy shrinking 1.1 percent next year. [ID:nN09285760] The co-chief of leading money manager Pimco foresaw the prospect of zero growth in 2009 and said it was too soon to say markets had bottomed.
"It puzzles me that people feel confident to declare the bottom," Mohamed El-Erian, who helps oversee $800 billion in assets at the world's biggest bond fund manager, told the Reuters Investment Outlook Summit. "What we're looking at is a very bumpy journey that will continue well into 2009. We're looking at multiple bottoms.
China vowed renewed measures to reinvigorate its economy after November data showed unexpected weakness in both exports and internal demand. Meanwhile China's trading partners across Europe reported industrial output in decline.
"Global demand for Chinese products is vanishing," said Gene Ma, an economist at China Economic Monitor, a Beijing consultancy. "Secondly, the credit freeze in importing countries has made it hard for Chinese exporters to sell abroad.
China's top leadership pledged to ramp up public spending and cut taxes to promote domestic demand in the world's fourth-largest economy.
European analysts said November and December would be even worse in the latest signs the global financial crisis has shoved leading economies into recession or slowdown.
"Industrial output in the euro zone has fallen into a very deep recession, suggesting that GDP in Q4 could contract even more sharply in Italy, France and Germany than is currently assumed," said Holger Schmieding, a Bank of America economist.
(Reuters)
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