WASHINGTON -A frantic, last-ditch attempt to forge a relief package for the auto industry collapsed in the U.S. Senate, dealing a giant blow to the immediate hopes of the Detroit 3 automakers – now all eyes have turned to the White House to relent and allow the Treasury to provide emergency loans from the $700 billion Wall Street bailout fund.

Senate Majority Leader Harry Reid of Nevada suggested the $14 billion wouldn’t be revisited until January. “It’s over with,” he told The Wall Street Journal.

The talks, which appeared close to a deal several times, broke off due to a sharp partisan dispute over the wages paid to workers at the manufacturing giants.

General Motors Corp. and Chrysler LLC, which have said they can’t last the year without federal aid, both hope the White House will now relent and allow the Treasury to provide emergency loans from the $700 billion Wall Street fund, people familiar with the matter said. Reid also urged that option.

To date, the administration has resisted the idea. But “that may be where they go next,” said Sen. John Thune (R., S.D.). There is always a chance Congress will act sooner if one of the companies totters on the brink, although that possibility appears remote.

GM, in a statement, said it is “deeply disappointed” that an agreement couldn’t be reached. GM had told Congress it needs $4 billion by the end of the month or it might not be able to keep its operations going. The company added that it will “assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis.”

GM’s European division Friday said it was very disappointed that Congress failed to reach an agreement, but said it is continuing to operate as normal while cutting costs aggressively.

The package’s difficulties hit Asian markets, which had posted gains this week in response to broad government efforts to help the world economy. In Tokyo, the Nikkei Stock Average of 225 companies closed 5.6% lower, while shares in Hong Kong fell 5.5 percent.

Reid said the Senate would be in recess, and would stand in pro forma session until January, when the new Congress will be convened with stronger Democratic majorities.

White House spokesman Tony Fratto Thursday voiced disappointment at the collapse in the Senate. He said no decisions have been made, but stressed, “we will evaluate our options in light of the breakdown in Congress.”

GM has already hired some of the U.S.’s biggest names in restructuring to consider whether to file for bankruptcy protection, said several people familiar with the matter, in what would be one of the largest and most controversial filings in U.S. history. GM Chief Executive Rick Wagoner has been reluctant to embrace the concept, fearing it would scare off potential buyers, and he “still believes the company can’t and shouldn’t file,” but decided in the last few weeks to hire the outside advisers, said a person familiar with the matter.

After a marathon day of negotiations, top Democrats appeared close to a deal that would toughen the bailout package in a bid to raise Republican support, which had proved an insurmountable stumbling block. The focus of talks was on seeking commitments to restructure the industry’s debt load and bring labor costs in line with wages paid by Toyota Motor Corp. and Nissan Motor Co. in the U.S., among other things.

But those talks fell apart after Republicans insisted that wages reach parity in 2009. Sen. Bob Corker (R., Tenn.), who emerged as a pivotal player this week in negotiations over the industry’s future, said negotiators were close to striking a bipartisan compromise.

Democrats were willing to reach parity, but not on such a swift timetable. Reid declared talks at an impasse. “We have not been able to get this over the finish line,” he said. “We have worked and worked…that’s just the way it is.”

With the talks in shambles, Reid moved late Thursday to bring up the White House-backed compromise, which would have expedited billions of dollars to the industry and created a strong government role in its restructuring. That effort failed on a 52-35 vote, as allies of the industry failed to win the 60 votes needed to end a Republican filibuster on the measure.

Sen. Christopher Dodd, a Connecticut Democrat, complained that Republicans had attempted to turn the wage issue into a political matter about organized labor, instead of making it an “an economic issue.” With the economy in recession, he suggested it wouldn’t be fair to force auto workers to accept wage cuts in 2009. “I’m deeply saddened. But more than saddened, I’m worried,” he said. “This will fail, we will go home, and I’m afraid our country will be in deeper and deeper trouble.”

The collapse of the talks represents a major defeat for three companies and an auto union that once wielded immense political clout. Even after two appearances in Washington by the GM, Ford and Chrysler CEOs, and a show of solidarity with the UAW, the auto makers were unable to convince many skeptical lawmakers to change their minds and support a bailout.

Only a handful of Republicans in the Senate had been willing to support the rescue package. Some raised concerns about government intervention in the marketplace. Others demanded the bill be strengthened to exact concessions from the industry.

Congress also remains bitter over the handling of the $700 billion financial rescue, which lawmakers on both sides feel they were pushed into approving and are displeased with the results.

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