Big 3 Bailout is rejected by US Senate

The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.

The failure to reach agreement on Capitol Hill raised a spectre of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.

After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.

The failure in Congress to provide a financial lifeline for GM and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect, Mr Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

"It’s over with," the Senate majority leader, Mr Harry Reid of Nevada, said on the Senate floor, after it was clear that a deal could not be reached. "I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight." Mr Reid added: "This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight."

The Republican leader, Senator, Mr Mitch McConnell of Kentucky, said: "We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves."

Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and two independents in favour. The White House issued said it would consider alternatives but offered no assurances. "It’s disappointing that Congress failed to act tonight," Mr Tony Fratto, the deputy press secretary, said in a statement