Congress to Detroit: Drop Dead

A loan package for the ailing auto industry died in Congress on Thursday when Senate Republicans refused to cooperate on a compromise plan. 

"The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month," the New York Times reported. The paper called the decision a "bruising defeat for President Bush in the waning weeks of his term."

The $14 billion proposal would have provided direct aid to General Motors and Chrysler, both of which said they needed the money by the end of December. Ford has said it does not need immediate financial assistance but may need help next year. Auto sales have plummeted during the recession that began last December, and even Japanese auto makers like Honda and Toyota have reported sharp declines in sales in the last quarter.

The Wall Street Journal called the Senate development a "sharp blow" to investor confidence and the Dow Jones Industrial Average plunged 200 points in early trading on Wall Street. But the Journal also reported Friday morning that the White House may tap a unused portion of the $700 billion financial bailout to rescue the auto industry.

A spokesman for the administration said it would be "irresponsible" to let the industry die, according to a news flash on the Journal's web site. The decision  to use money from the Troubled Asset Relief Program (TARP) would be a sharp reversal for Treasury Secretary Henry Paulson, who has said repeatedly that the money should not go to help the auto makers.

Talks apparently broke down over efforts to bring the "Big Three" automakers' labor costs in line with wages paid by Toyota and Nissan, according to the Journal. Democrats were reportedly willing to reach parity, but not on the swift timetable demanded by Republicans, the paper reported.

GM stock, already depreciated from talk of bankruptcy, dropped more than 15 percent in the first 15 minutes of trading.