Plans to offer US automakers a $14 billion emergency loan were in tatters last night (11th December) after talks collapsed in the Senate.

The rescue package - which is predominantly aimed at the 'Big Three' of General Motors (GM), Chrysler and Ford - was approved in the House of Representatives on Wednesday.

However, dicussions broke down over Republican demands for the United Auto Workers union to significantly cut wages by 2009 to bring them in line with those of Japanese automakers.

The union would not agree to reductions before its current contract expires in 2011 and the Senate subsequently voted 52-35 against the bail-out - with 60 votes needed for it to be accepted.

A White House statement read: "It's disappointing that Congress failed to act tonight.

''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.''

Majority Leader Harry Reid, who hopes that the government will dip into the recent $700 billion rescue fund for financial institutions to help the automakers, was left disappointed by the decision.

''I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," he said.

The rejection can largely be explained by the fact that the Democrats have a majority of just one in the Senate and that congressional Republicans were already angry that the deal was passed in the House.

GM and Chrysler have both expressed fears that they are on the verge of collapse, while Ford has claimed that it will need additional funding in the near future.


Source:
Auto Bailout Talks Collapse in the Senate (11/12/08)
http://www.nytimes.com/aponline/2008/12/11/washington/AP-Congress-Autos.html?_r=2&hp