After hours of closed-doors talks, which separately included company, creditor and worker representatives, the impasse came when the United Auto Workers would not agree to align their labor costs with those of workers foreign-owned U.S. plants by the end of 2009, said Senate Republican leader Mitch McConnell and others.
"We were about three words away from a deal," said Sen. Bob Corker, R-Tenn., the lead negotiator for Republicans. The question now: What next?
A GM official wasn't ready to give up hope. "We'll see what (Friday) brings," said spokesman Greg Martin. "Let's wait and see."
GM and Chrysler have said they needed at least $4 billion each by the end of the year to stay afloat and have maintained bankruptcy filing to restructure is not a viable option. Both have said they fear filing would cause their sales to dry up instantly on shoppers' fears over warranties and parts.
GM and Chrysler could conserve cash by shutting down operations between now and Jan. 20 — in hopes of quick aid when President-elect Obama is inaugurated and a new Congress is in place. Obama supports help for the industry with conditions. GM has already said it's shutting down for two weeks over Christmas.
"It behooves them to hang on, if they can," said Aaron Bragman, another analyst for IHS Global Insight. "You do that by basically shutting everything down and trying to take out as much costs as possible."
Shutting down would be a high-stakes risk: The automakers would have no revenue during that time even if cars sell, because they book revenue when vehicles are shipped to dealers.
Shutting operations that long also could devastate suppliers. Because they supply domestic and foreign-owned plants, the impact would ripple through the industry. "It could take out the supply base," said David Cole, chairman of the Center for Automotive Research. "It's the ultimate in idiocy."
Contributing: Ken Dilanian in Washington; Sharon Silke Carty in Detroit and wire services.