Hope dims for deal to rescue carmakers as talks collapse

WASHINGTON -- There will be no congressional lifeline for the American auto industry this year.

The Senate on Thursday night failed to compromise on a $14 billion bailout for General Motors and Chrysler, after Republicans objected to a House bill passed Wednesday with White House backing.

"It's over with," Senate Majority Leader Harry Reid said on the Senate floor.

If all three were to go under, up to 2.6 million jobs — about 1.9% of the U.S. workforce — could be lost, estimates Moody's Economy.com chief economist Mark Zandi. That includes more than 255,000 people directly tied to the three companies and an additional 2.3 million whose jobs are indirectly dependent, from people who work in the steel, glass, fabric, tire and electronics industries.

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 tomorrow 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.

Treasury Secretary Henry Paulson could provide aid from the $700 billion financial rescue program, but he has said that money must be reserved to protect the financial system.