Democrats in Congress put off a vote on a bailout for crisis-hit “Big Three” auto makers until at least December, and ordered industry chiefs to come up with a new restructuring plan.
The decision to delay the multi-billion dollar rescue for the crippled industry helped send US stocks into another free-fall, deepening the economic crisis Barack Obama will inherit when he is sworn in as president in January.
Democrats said the chief executives of the “Big Three” auto firms, pilloried for flying to Washington to plead for rescue aid on luxury corporate jets, had failed to convince them they could restructure their reeling companies.
“Until they show the plan, we cannot show them the money,” House speaker Nancy Pelosi told reporters.
Senate Majority leader Harry Reid said it was a “sad reality” that despite a bipartisan deal by senators from states which have millions of jobs depending on the industry, that there was not yet sufficient support for a bailout.
He said the chiefs of Chrysler, Ford and General Motors must come up with a restructuring plan and Congress would consider whether to provide billions of dollars in funding in December.
“We do not have the votes,” Reid said.
“Yes, we are kicking the can down the road, because that will give us the opportunity to do something positive.”
“The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last,” Reid told reporters.
The auto giants say their problems are not of their making, arguing they have been hit by falling demand amid the financial crisis.
But critics say the firms have been left flat-footed because they failed to develop smaller, fuel efficient cars, and for years concentrated on gas-guzzling sports utility vehicles, demand for which was hit by high fuel prices.
Reid said the industry had until December 2 to work out a new plan and Congress could hold another lame duck session the following week to mull action.
Earlier a bipartisan group of senators from Michigan, Missouri and Ohio said they had reached a deal to support the industry with bridge loans.
The plan would use funds from a 25-billion-dollar Energy Department loan to the industry that was originally designed to spur development of fuel-efficient vehicles as emergency funding.
Repayments by the recovering firms would then replenish the fund and it would be returned to its original purpose, but Reid said the votes were not there to pass the pact before the Thanksgiving break next week.
Democrats say money to save Detroit should be taken from the 700-billion-dollar financial industry rescue bailout but the White House refused.
“Obviously, we are disappointed we are not going to act today,” said Senator Carl Levin of Michigan, one of the prime movers behind the compromise.
“We believe there is a reasonable chance that if this were put to a vote today or tomorrow that it could get the 60 votes necessary.”
Sixty votes would be needed in the 100-seat chamber to pass the bailout and overcome filibuster obstruction tactics from senators opposed to the plan.
Ron Gettelfinger, president of the United Automobile Workers union, told reporters in Detroit it was “critically important that the Bush administration and Congress reach some agreement” to save an industry he described as “the backbone of the economy.”
“The cost of not acting could be devastating,” he said. “Without immediate assistance, we could see a collapse of one or more of the domestic auto companies by the end of this year.”
News of the bailout delay helped send stocks into another damaging plunge with the Dow Jones Industrials Average finishing 5.56 percent to a fresh five-and-a-half year low.
White House spokeswoman Dana Perino urged lawmakers to pass the compromise plan quickly.
“While we need to review the language, this is an agreement the president could support. We encourage the Congress to pass it as soon as possible,” she said in a statement.
Top executives from Chrysler, Ford and General Motors this week begged Congress for the multi-billion-dollar loans and warned that the industry faces a “catastrophic collapse” if the lawmakers didn't fund them.
