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WASHINGTON – A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

AP Photo/Haraz N. Ghanbari

The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

The White House said it was evaluating its options in light of the breakdown.

"It's disappointing that Congress failed to act tonight," a White House statement said. "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."

Play Video CBS 2 New York – GOP Senators Revolt Against $14B Auto Bailout

The Senate rejected the bailout 52-35 on a procedural vote — well short of the 60 required — after the talks fell apart.

The implosion followed an unprecedented marathon negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Reid called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during the negotiations. Messages were left with Reuther and UAW spokesman Roger Kerson.

The stunning disintegration was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected in a bailout-fatigued postelection Congress, with Bush's influence at a low ebb.

Congressional Republicans were already in open revolt against Bush over an auto bailout deal the White House negotiated with congressional Democrats, passed by the House passed on Wednesday.

The momentum flagged even amid evidence of deepening economic meltdown. The government reported last week that the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

WASHINGTON – A House-passed bill to speed $14 billion in loans to Detroit's automakers stands on shaky ground in a bailout-weary Congress, undermined by Republican opposition that could derail the emergency aid in the Senate. AP – Sen. Richard Shelby, R-Ala., center, accompanied by, from left, Sen. Tom Coburn, R-Okla., Sen. Jon Ensign

Republicans are challenging lame-duck President George W. Bush on the proposal, arguing that any support for the domestic auto industry should carry significant concessions from autoworkers and creditors and reject tougher environmental rules imposed by House Democrats. Play Video CNBC – Republicans Oppose Auto Bailou

The House approved the plan late Wednesday on a vote of 237-170. It would infuse money within days into cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough cash to make it through 2009, would also be eligible for federal aid.

Supporters cited dire warnings from GM and Chrysler executives, who have said they could run out of cash within weeks, and concerns that a carmaker collapse would erase tens of thousands of jobs and jolt an already bleak economy.

Democrats and the Bush White House hoped the Senate would vote on the legislation as early as Thursday. But based on concerns raised by GOP senators — and a still-uncertain level of support even among Democrats — they had a lot of work to do.

AP

A leading Senate Republican opponent said Thursday that he cannot back spending $14 billion of taxpayer money on a plan that would call for a restructuring of the industry, but which fails to detail just how that would be accomplished.

"I think that is putting the cart before the horse and isn't reponsible in terms of tax dollars," Sen. David Vitter of Louisiana said on CBS's "The Early Show."

The measure's murky outlook reflected the difficulty of approving another federal financial rescue on the heels of the deeply unpopular, $700 billion Wall Street bailout, as the clock ticks down on the current Congress and Bush's influence is at a low ebb.

"People realize that this bill is an incredibly weak bill (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Sen. Bob Corker, R-Tenn.

Even Republicans representing states with automobile plants said the proposal was far from ideal. Sen. Kit Bond, R-Mo., whose state is home to five auto plants, said he wanted to see changes. Sen. George Voinovich, R-Ohio, said the bill lacked the necessary Republicans to pass the Senate.

The measure would create a government "car czar," to be named by Bush to issue the loans, empowered with the ability to yank back the loans and force the carmakers into bankruptcy next spring if they fail to cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.

Opposition wasn't limited to Republicans.

Democratic Sen. Max Baucus of Montana is opposing the measure because of a provision to bail out transit agencies that were involved in transactions now considered unlawful tax shelters.

Under the House-passed bill, the carmakers would have to submit blueprints on March 31 to the industry overseer showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.

The automakers initially asked Congress for $25 billion, then returned two weeks later to plead for as much as $34 billion. But with the White House refusing to dole out new spending for the Big Three, congressional Democrats agreed to use an existing program that was to help carmakers retool their factories to make more fuel-efficient cars.

That fund yielded only $15 billion in emergency loans, and when negotiators agreed to leave some money in the environmental program, the amount fell to $14 billion.

Democrats agreed to scrap language — which the White House had declared a deal-breaker — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states. But they kept a provision to force the automakers to abide by those states' limits — a kind of consolation prize for environmentalists, who already were livid at the raid of the fuel-efficiency program.

Senate Democrats unveiled a nearly identical measure that omitted the requirement, but that bill still faced long odds.

The Bush administration is expected to work with President-elect Barack Obama's team on choosing the industry czar. The overseer would have say-so over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more.

The measure also would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

WASHINGTON – A $14 billion rescue package for the nation's imperiled auto industry sped to approval in the House Wednesday night, but the emergency bailout was still in jeopardy from Republicans who were setting out roadblocks in the Senate.

AP Photo/Ron Edmond

Democrats and the Bush White House hoped for a Senate vote as early as Thursday and enactment by week's end. They argued that the loans authorized by the measure were needed to stave off disaster for the auto industry — and a crushing further blow to the reeling national economy.

The legislation, approved 237-170 by the House, would provide money within days to cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough to stay afloat, would also be eligible for federal aid.

Republicans were preparing a strong fight against the aid plan in the Senate, not only taking on the Democrats but standing in open revolt against their party's lame-duck president on the measure.

The Republicans want to force the companies into bankruptcy or mandate hefty concessions from autoworkers and creditors as a condition of any federal aid. They also oppose an environmental mandate that House Democrats insisted on including in the measure.

House Speaker Nancy Pelosi said the House-passed bill represented "tough love" for U.S. auto companies and "giving a chance — this one more chance — to this great industry."

The White House, struggling to sell the package to congressional Republicans, said earlier that a carmaker bankruptcy could be fatal to the auto industry and have a devastating impact on workers, families and the economy.

"We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs," said Dana Perino, the White House press secretary.

But the measure faces a difficult road in the Senate, where it needs 60 votes to advance. Rank-and-file Senate Republicans skewered the bill during a closed-door luncheon with White House Chief of Staff Josh Bolten, who was dispatched to Capitol Hill to make a case for the rescue package.

Even among Senate Democrats, the level of support was still uncertain. In the House, 20 Democrats joined 150 Republicans in voting "no," while 32 Republicans sided with 205 Democrats to back the bill.

Besides providing cash for the auto companies, it would create a government "car czar," to be named by President George W. Bush to dole out the loans, with the power to take back the money and force the carmakers into bankruptcy next spring if they didn't cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.

"To give up on the auto industry now would be to condemn the American economy at one of its most vulnerable periods in our economic history to a degree of further hurt," said Rep. Barney Frank, D-Mass, the Financial Services Committee chairman.

Behind the scenes, Senate Democratic and Republican leaders scrambled for a deal that would allow votes on the bill on Thursday. Some GOP senators were demanding votes on an alternative that would order the automakers to take specific actions to restructure — including steep wage cuts and debt restructuring — in return for any federal money.

Opposition from Republicans reflected the tricky task of pushing yet another federal rescue through a bailout-weary Congress, with Bush's influence on the wane.

"People realize that this bill is an incredibly weak bill (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Sen. Bob Corker, R-Tenn.

The auto aid debate was replete with echoes of the tense, early-October drama surrounding the $700 billion Wall Street bailout, when a marathon set of negotiations yielded a much-celebrated deal that came apart quickly amid GOP opposition and public outrage. That bill ultimately passed after much arguing, cajoling, threatening and lobbying among lawmakers, and Bush signed it.

Before passing the auto measure Wednesday, the House voted to add language requiring that banks that are bailed out by the government report quarterly on how much they have increased or decreased lending.

In the Senate, opposition to the auto rescue wasn't limited to Republicans.

Democratic Sen. Max Baucus of Montana announced he was against the measure because of a provision to bail out transit agencies that were involved in transactions that are now considered unlawful tax shelters.

House Republicans swiftly voiced their opposition and called for a plan that would instead provide government insurance to subsidize new private investment in the Big Three automakers, demand major labor givebacks and debt restructuring at the companies and encourage them to declare bankruptcy.

Under the House-passed measure, the carmakers would have to submit blueprints on March 31 to the industry overseer showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.

The carmakers initially asked Congress for $25 billion, then returned two weeks later to plead for as much as $34 billion. But with the White House refusing to dole out new spending for the Big Three, congressional Democrats agreed to use an existing program that was to help carmakers retool their factories to make more fuel-efficient cars.

That fund yielded only $15 billion in emergency loans, and when negotiators agreed to leave some money in the environmental program, the amount fell to $14 billion.

Democrats agreed to scrap language — which the White House had called a deal-breaker — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states. But they kept a provision to force the automakers to abide by those states' limits — a kind of consolation prize for environmentalists, who already were livid at the raid of the fuel-efficiency program.

Senate Democrats unveiled a nearly identical measure that omitted the requirement, but that bill still faced long odds.

At the White House, Deputy Chief of Staff Joel Kaplan said the Bush administration would work with President-elect Barack Obama's team on choosing industry czar.

Obama defended the auto bailout as necessary given the threat a potential Big Three collapse could pose to an already battered economy.

"As messy as it may be, I think there's a sense of, 'Let's stabilize the patient,'" he said in an interview published in Wednesday's Chicago Tribune and Los Angeles Times.

The car czar would have say-so over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more. The companies — including the private equity firm Cerberus, which owns a majority stake in Chrysler — would have to open their books to the government overseer.

And if Chrysler defaulted on its loan, Cerberus would be responsible for reimbursing the government.

The measure also would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the bill is an unrelated pay raise for federal judges.

WASHINGTON – Weary Democratic congressional leaders and White House officials agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry. But the rescue faced snags as Republicans raised deep concerns.

Congressional aides and a senior administration official said the proposed deal would speed the loans to Detroit's struggling car companies and place a "car czar" named by President George W. Bush in charge of overhauling the auto industry. Congress could vote on the plan as early as Wednesday and the money could be disbursed within days.

AP

A breakthrough came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don't strike a deal with labor unions, creditors and others to ensure their survival by next spring — essentially pushing them into bankruptcy.

"A great deal of progress has been made on auto legislation that will protect the taxpayer and ensure that short-term financing is available only to companies prepared to undertake the dramatic restructuring necessary to become viable and competitive," Dana Perino, the White House press secretary, said late Tuesday.

Earlier in the day, Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the remaining issues were minor.

"There do not appear to me to be differences in principle of a sufficient nature to blow this thing up," said Frank, whose staff is helping to draft the bill.

Still, staff aides worked into the night fine-tuning legislative details of the agreement. It could face substantial obstacles from congressional Republicans, who remained skeptical of the White House-negotiated plan. A group of conservatives led by Sen. John Ensign, R-Nev., has threatened to block the measure.

A further stumbling block was Democrats' refusal to scrap language, vehemently opposed by the White House, that would force the carmakers to drop lawsuits challenging tough emissions limits in California and other states.

That measure "kills the deal," said Dan Meyer, Bush's top lobbyist.

Senior Democratic aides acknowledged as much Tuesday and said they expected the provision to ultimately be dropped.

Environmentalists, who count House Speaker Nancy Pelosi, D-Calif., among their closest allies, already were irate that the bailout uses money set aside for a program to help the automakers finance the retooling of their factories so they could produce greener vehicles.

Another remaining hang-up was over ensuring that Cerberus, the private equity firm that owns Chrysler LLC, would reimburse the government if the auto company defaulted on its loan, said a congressional negotiator who spoke only on condition of anonymity because he was not authorized to disclose details of the emerging deal.

But the White House and congressional Democrats resolved other major conflicts. Democrats said they were willing to toughen the measure to require that the czar revoke loans from car companies that couldn't show they were viable by the end of March — rather than simply allowing the overseer to take back the money.

That would essentially let the czar force an automaker into bankruptcy if it didn't present a feasible restructuring plan.

They were also near agreement to weaken a proposal to give the czar veto power over automakers' business transactions — something the White House and automakers had said was unworkable. They were discussing giving the overseer say-so over transactions of $100 million or more, instead of putting the limit at $25 million.

Even if they seal the deal, though, conservative Republicans who want to force one or more of the Big Three into bankruptcy warned they might try to block the measure, virtually guaranteeing that it will need a 60-vote majority to pass and possibly delaying approval for days.

"I think that not only myself, but several of us will be looking at possibly blocking this package," Ensign told CNBC.

The measure would be open to Detroit's Big Three, but is expected to provide emergency loans only to General Motors Corp. and Chrysler, which have said they could collapse within weeks absent federal help. Ford Motor Co. has said it doesn't need an immediate cash transfusion, but wants a $9 billion line of credit to insulate against further deterioration in the economy.

The rescue took shape with the nation in recession, Congress and the presidency both in transition, Wall Street ricocheting daily and the Federal Reserve and Bush Treasury Department fighting to steady the reeling financial industry.

Sen. Mitch McConnell, R-Ky., said he was concerned that Democrats were proposing a package that "fails to require the kind of serious reform that will ensure long-term viability for struggling automobile companies."

With their approach, "we open the door to unlimited federal subsidies in the future," McConnell said.

Getting 60 votes for an agreement, with many senators expected to be absent for the emergency, postelection debate, could be tricky.

Said Sen. Carl Levin, D-Mich., an ally of the auto industry: "This gets us to the 20 yard line, but getting over the goal line will take a major effort, particularly in the Senate." He called for Bush and President-elect Barack Obama to lobby personally for the auto bailout.

The legislation under discussion would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the plan is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

Democrats also inserted a provision in the bill to bail out some of the nation's largest transit systems. The bus and rail systems could be on the hook for billions of dollars in payments because exotic deals they entered into with investors — which have since been declared unlawful — have gone sour with the collapse of American International Group Inc. and other financial institutions.

WASHINGTON (Reuters) – White House and congressional negotiators sought on Sunday to resolve remaining differences over an emergency rescue for the struggling auto industry, a stark symbol of the deepening U.S. economic crisis.

Reuters – General Motors Chairman and CEO Richard Wagoner (L-R), Chrysler CEO Robert Nardelli, and Ford Motor Company

Prodded by shock unemployment figures that showed the country shed more than half a million jobs last month alone, negotiators tried to turn into legislation an agreement in principle to provide "The Big Three" U.S. automakers with at least $15 billion in short-term loans.

"The expectation is that White House will see our draft (bill) tonight," a Democratic aide said, adding several unspecified modifications were being incorporated into it.

Play Video ABC News – Steering the Auto Industry Bailout

In addition to reorganizing automakers and protecting taxpayer investment, possible conditions include creating a government "car czar" to oversee the bailout and additional concessions by the United Auto Workers (UAW) union as well as the corporate leadership.

The Senate is due back in session on Monday and negotiators hope to have a package ready that can be quickly approved and sent to President George W. Bush as one of the last measures he signs into law before Democrat Barack Obama succeeds him as president on January 20.

The amounts under discussion are less than half the $34 billion that the automakers asked Congress for last week. Some economists believe they may need $75 billion to $125 billion to survive in the longer term.

Nevertheless, lawmakers fear a recession will deepen if any of the three giants -- GM, Ford and Chrysler -- collapses soon. But some from Bush's Republican party don't want another rescue plan after a $700 billion Wall Street rescue package that triggered voter backlash in the November 4 congressional elections.

Critics also say market forces, not state intervention, ought to determine the fate of the auto industry.

Bailout backers say that since the government helped Wall Street, it must also help hundreds of thousands of blue-collar auto workers who have the support of Democrats.

Obama added his weight to the drive, saying while the car companies had made mistakes, letting them collapse was not an option -- although they must be forced to radically revamp their operations.

"I think that Congress is doing the exact right thing by asking for a conditions-based assistance package that holds the auto industry's feet to the fire," he said in Chicago, adding that new management could also be an option.

CONDITIONS AND CONCESSIONS

A UAW official, speaking after a Detroit church service dedicated to prayers for the auto industry, said on Sunday the union was open to moves by Chrysler to seek an alliance with a rival automaker as long as it saves as many jobs as possible.

Senate Banking Committee Chairman Christopher Dodd said on Sunday that GM chairman Rick Wagoner should resign to allow new leadership to restructure the faltering company.

"He has to move on," Dodd, a Connecticut Democrat who is leading efforts to craft bailout legislation, told CBS.

Faced with plummeting sales they blame largely on the credit crunch and recession, GM, Chrysler and Ford sought $34 billion from Congress last week to avoid possible collapse. A deal negotiated by the White House and Congress would provide no more than $17 billion to last into March.

Critics have said any loans would be a waste of money unless U.S. automakers were able to cut costs and better compete with more fuel-efficient, foreign-made cars.

Democratic Sen. Carl Levin of Michigan, home to the major automakers, said he was confident there would be a deal in the next 24 hours. But he was less certain if backers would garner the 60 votes needed in the 100-seat Senate to avoid a Republican procedural hurdle known as a filibuster.

"That's a much more complicated question," Levin said on "Fox News Sunday."

Senate Republican Leader Mitch McConnell earlier indicated he might support a bailout if it had adequate safeguards. But Sen. Richard Shelby, an Alabama Republican who has spoken out against the proposed "bridge loan" emergency package, indicated he was ready for battle.

"This is a bridge loan to nowhere," said Shelby, appearing with Levin on "Fox News Sunday."

UNKNOWN FUTURE

Despite the progress in Washington, America's auto industry is headed into an unknown future.

GM and Chrysler, along with Ford once bywords for U.S. industrial power, are both headed for wrenching restructuring under federal oversight that will hit their investors, creditors, dealers and workers almost as hard as if they had filed for bankruptcy protection.

Ford is in slightly better financial shape, but all three are expected to continue to mothball plants and dismiss tens of thousands of employees.

A breakthrough in the auto crisis emerged on Friday after government statistics showed that employers slashed more than 533,000 jobs in November, the highest monthly decline in 34 years. This underscored lawmakers' feared that hundreds of thousands more would be thrown out of work if any of the major automakers went down.