"I'm terribly disappointed that we are not able to arrive at a conclusion," he said. "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

Asian markets fall

Asian markets dropped almost immediately when the announcement was made that congressional efforts to fund the bailout were effectively over for the year.

Japan's Nikkei 225 stock average tumbled 484.68 points, or 5.56 per cent, to close at 8,235.87 on Friday, and Hong Kong's Hang Seng index was down 5.5 per cent.

South Korea's Kospi closed 4.4 percent lower, while markets in Singapore, Australia, China and India all dropped between two per cent and four per cent.

The FTSEurofirst 300 index of leading European shares had lost 3.6 per cent shortly after opening.

"I think the markets are in a political vaccum, they're very, very nervous. I think the consequences are deep and far reaching," Aly Khan Satchu, a Nairobi-based financial analyst, told Al Jazeera.

The region's automotive industry stocks fell with Toyota Motor Corp, Nissan Motor Co and other companies all suffering losses of more than 10 per cent. 

The US dollar fell to a 13-year low against the Japanese yen, while oil dropped below $46 a barrel.

The plan would have provided GM and Chrysler loans to operate until March 31 and in turn force them to carry out major restructuring that would include paying off the government aid.

Ford has said it does not need any assistance at the moment but could need financial help if any of its major rivals went under.

But some Republicans had balked at giving any of the so-called Big Three federal aid unless the powerful workers' union agreed to slash wages next year to bring them into line with those of Japanese car manufacturers.

'Big hit'

Rob Reynolds, Al Jazeera's Washington correspondent, said there was a political battle behind fought behind the scenes and some Republicans were being open about their desire to see trade unions take a "big hit" on the issue.

"[UAW] has spent a lot of money ... to defeat Republican candidates, including some of the very senators who have voted on the measure," Al Jazeera's correspondent said.

"These companies have either already failed or are failing ... but we all in America will benefit by competition"

Richard C. Shelby,
Republican senator

"So there's political bad blood in there, and there's a desire, many union officials feel, on the part of these Republicans from southern states to cut the union down to size."

Others opposed the deal out of principle, saying it was tantamount to nationalisation.

"These companies have either already failed or are failing. And that's a shame. These aren't the General Motors, Ford and Chrysler I knew but we all in America will benefit by competition," Richard Shelby, a Republican senator for Alabama, said.

All three firms have been criticised for failing to restructure and adapt to the market by providing more fuel-efficient vehicles.

The White House, which had pushed for the senate to back the deal, said it would assess its options for moving forward, but it has repeatedly said that the Wall Street bailout fund set up in October would not be used for the car industry.

A similar version of the plan had passed in the US House of Representatives on Wednesday night by a vote of 237-170, but the senate had to pass the deal before George Bush, the US president, could sign it into law.

"It's disappointing that congress failed to act tonight," Tony Fratto, a spokesman for the White House, said. "We will evaluate our options in light of the breakdown in congress."

'Deeply disappointed'

Ford, Chrysler and General Motors, spent weeks pleading with US politicians to assist their ailing firms, saying their collapse could devastate the economy and cause millions of job losses.

GM said in a statement it was "deeply disappointed" that the bipartisan agreement had faltered.

Car manufacturer executives say their firms will collapse if no bailout is passed [Reuters]
"We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," it said.

Chrysler also said it "will continue to pursue a workable solution to help ensure the future viability of the company".

But Satchu questioned whether the companies had a future and said that providing the $14bn bailout could have just been throwing "good money after bad".

"I think it's like giving a comatose patient one of those big surges of energy and I don't know whether its really going to work," the Nairobi-based financial analyst said.
 
"Where is the demand for these new cars that they're going to produce? What are we going to do with them except stack them up in various warehouses?"

Under the proposed bailout terms, the loans were intended to assist the firms until the end of March 2009, after which future help would depend on the quality of restructuring plans demonstrating their viability.

A presidentially appointed trustee, or "car czar" would have then enforced the loan conditions and judged the restructuring plans, with the power to recommend bankruptcy if he or she deemed the companies' plans to be insufficient.