The £9bn financial aid package has been stopped by Republican senators, who voted against the bailout plans.
This is because they feel the UAW union is not making enough concessions.
It is a major stumbling block for the crisis-hit industry, which said that cash is vital to remain in business. Analysts have speculated that GM only has enough cash to stay in business until early next year.
Chrysler is equally troubled, while Ford remains perilous, too.
What happens next remains unclear. President-Elect Barack Obama has already stated that rescue packages are needed for the industry. It means that January 20th, when Obama takes to office, could be a key date.
In the meantime, companies could apply for cash from TARP – the Troubled Asset Relief Programme.
Chapter 11 bankruptcy is also an option for the most deeply troubled maker, GM. This is not as dramatic as it is in the UK. It would mean the company wouldn’t have to pay its debtors, and could commence restructuring plans.
Government officials are unwilling to see the car industry go out of business. Dependent workers number millions, many of whom are in troubled states such as Detroit and Ohio.
This means aid plans are likely to go ahead. It is in which form that’s proving so controversial.
Car Dealer will be following news carefully. Come back for updates as they happen.
By Richard Aucock