US auto dollars on hold

The US Senate has abandoned efforts to formulate and approve a bill to provide emergency loans to General Motors and Chrysler. US media outlets are reporting the talks broke down this afternoon -- late Thursday night Washington time.

Despite lengthy negotiations, Republican senators declined to support the $US14b funding plan. The plan had been approved by Congress earlier this week (more here).

The talks deadlocked after a Republican representative demanded that the rescue plan include "steep cuts in pay and benefits by the United Automobile Workers union", claims the New York Times.

General Motors and Chrysler have both claimed they may run out of cash before the end of 2008 without the government funding.

General Motors' statement issued on the failure of talks said the company was "deeply disappointed" agreement could not be reached.

"We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis,'' the company said.

CNN.com has speculated GM will look to the outgoing Bush Administration to provide funding that doesn't need Senate approval.

Respected US automotive media outlet, Automotive News (AN), quoted US Senate Majority Leader, Harry Reid, in its latest report.

"We have not been able to get this over the finish line," Reid told AN.

Reid told AN "he feared the effect the loan failure would have on Wall Street" and said: "It's not going to be a pretty sight.''

Ford and Chrysler are yet to comment on breakdown of negotiations. Unlike GM and Chrysler, the Blue Oval is not seeking immediate funding but has asked for access to credit should the current situation worsen.

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