By John Crawley and Richard Cowan
WASHINGTON (Reuters) - A proposed bailout of U.S. automakers failed in the Senate on Thursday night, raising the specter of an industry collapse that sent Asian markets reeling and sparked fears it could deepen the recession.
"It's over with," Senate Majority Leader Harry Reid said of congressional efforts this year just before the Democratic proposal to extend up to $14 billion to the stricken industry fell short of the needed votes on a procedural motion.
Pressure immediately shifted to the White House, with calls for President George W. Bush to consider intervening with emergency financing.
General Motors Corp and Chrysler LLC have warned of near-term collapse if they did not receive a government bailout.
"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," Reid said.
Markets across the Asia-Pacific region fell more than 3 percent on the development, with Japan's Nikkei average and Hong Kong's Hang Seng both down more than 5 percent.
U.S. crude prices fell by nearly $2 to $46.11 a barrel.
Because of their shared suppliers and vendors, industry observers fear the failure of one Detroit manufacturer could drag down the other two as well as other businesses.
BANKRUPTCY CONCERN
"It's going to be very difficult for them not to file for bankruptcy," Erich Merkle, consultant at Crowe Chizek in Grand Rapids, Michigan, said of the carmakers if they do not get help.
"GM has probably got until January and I would suspect the next step would be that GM will provide a date and say that at this date we will file," Merkle said.
GM, Ford Motor Co. and Chrysler employ nearly 250,000 people directly, and 100,000 more jobs at parts suppliers could hang on their survival. The companies say one in 10 U.S. jobs are tied to the auto sector.
The White House called congressional inaction a breakdown and said it would evaluate its options.
"It has now fallen to the president to take action," said Sen. Carl Levin, a Michigan Democrat who has spearheaded efforts for a month to get help for Detroit.
Bush should "move now," said Republican Sen. George Voinovich of Ohio, adding, "The dominoes are already falling" throughout the United States."
Reid and House Speaker Nancy Pelosi called on Bush to immediately explore short-term financial help, including tapping a $700 billion fund created in October for the Treasury Department assist the financial services industry.
The Bush administration has so far resisted Democratic appeals to take that step. Treasury declined to comment.
Sen. Christopher Dodd, a Connecticut Democrat, said it was possible Congress could take a "second crack" at an auto rescue in January when Democrats will have larger majorities in both houses. President-elect Barack Obama favors help for automakers.
'THREE WORDS AWAY FROM A DEAL'
The late night development followed intense discussions on a possible 11th-hour compromise that participants said dissolved over proposed wage concessions by the United Auto Workers union.
"We were three words away from a deal," said Sen. Bob Corker, a Tennessee Republican who proposed the alternative and led the talks.
Dodd said the main issue of disagreement was the date to require the Detroit autoworkers' pay parity with workers at foreign auto manufacturers.
The UAW could not immediately be reached for comment.
The global auto industry is reeling from depressed sales, made worse by the credit crunch and the U.S. recession.
GM and Chrysler, which is owned by private equity group Cerberus Capital Management, sought billions in immediate aid to see them through March.
GM said in a statement it would "assess all of its options to continue our restructuring" and to "obtain the means to weather the current economic crisis."
Chrysler said it would continue "to pursue a workable solution to help ensure" the company's future viability.
Ford, in a better cash position, had asked for a hefty line of credit. It had no immediate comment.
The House of Representatives on Wednesday passed its version of a Democratic-sponsored bailout that was virtually identical to the measure that fell in the Senate. Democrats hold a razor-thin majority in the Senate, which rejected the bill, 52-35.
"These companies could be saved. I've said I think they are bloated, their management is bloated. These companies either already failed or are fading and that is a shame," said Alabama Republican Richard Shelby, who has opposed any bailout.
Polls show Americans split on bailing out the Detroit automakers, widely criticized for fighting tougher fuel efficiency standards and poor model designs that have left the companies gasping with a stable of products losing popularity with consumers.
Any failure of aid leaves several U.S. auto parts suppliers with deep exposure to the "Detroit Three" vulnerable, including American Axle, Visteon Corp and those with high debt levels.
(Additional reporting by Ross Colvin, Matt Spetalnick, Kevin Drawbaugh, Jeremy Pelofsky, David Bailey, Donna Smith and Richard Cowan; Editing by Eric Walsh)
