Auto firms' rescue package stalls

A PLAN to give troubled United States auto makers billions of dollars in government-backed loans is on life support, leaving the fate of hundreds of thousands of workers and Detroit's once-venerable car companies hanging in the balance.

Senate Majority Leader Harry Reid canceled plans on Wednesday for a vote on a bill to carve US$25 billion in new auto-industry loans out of the US$700 billion Wall Street rescue fund. The Bush administration has rejected Democrats' plans to dip into that pot of money.

Warning of economic disaster, a bipartisan group of senators from auto-industry states are trying to reach a deal on an alternative package. If an agreement can be reached, Reid said the Senate still could vote on it as part of a measure to extend jobless benefits.

But Reid acknowledged that was "not going to be easy."

With all sides sensing doom for a rescue of the Big Three auto makers, the finger-pointing began. White House press secretary Dana Perino said that if Congress "leaves for a two-month vacation without having addressed this important issue ... then the Congress will bear responsibility for anything that happens."

Congressional Democrats countered that the Treasury Department already had the power to grant emergency funds to the auto makers, but the Bush administration had opposed the approach.

The leaders of General Motors Corp, Ford Motor Co and Chrysler LLC painted a grim picture of their financial position during two days of congressional hearings, warning that the collapse of the auto industry could lead to the loss of 3 million jobs.

Detroit's auto makers, hurt by a sharp drop in sales and a nearly frozen credit market, burned through almost US$18 billion in cash reserves during the last quarter, and GM and Chrysler both said they could collapse in weeks.

"I don't believe we have the luxury of a lot of time," GM CEO Rick Wagoner told a House hearing.