Friday, December 19, 2008
Possible respite for values of nearly-new cars
Analysis by industry experts EurotaxGlass's has revealed that the volume of nearly-new vehicles being offered for sale at the end of 2008 is around 35 per cent lower than was the case during the same period last year, when supply far exceeded demand. A direct result of far fewer dealer self-registrations, this should mean that values of younger used cars are now less likely to continue to fall as heavily as had been the case just a few months ago.
"In late 2007 the supply of '57'-plated cars significantly outweighed market demand," notes Adrian Rushmore, Managing Editor at EurotaxGlass's. "This year, by contrast, the number of '58'-plated vehicles appears to be more manageable. Many dealers still have on their books a significant number of cars at or just over three months' old, but in general they are not overstocked - at least, not to the extent that they were 12 months ago.
"In particular there are fewer ex-demonstrator vehicles to dispose of, meaning that values of cars of this age may finally begin to come under control after many months of severe falls. They are still likely to continue to decline, as with values of most second-hand vehicles, just at a more gradual rate."
Contributing to the situation are rental companies, who have retained cars for longer periods in 2008 compared to last year, helping to reduce the quantity of ex-rental stock arriving on dealer forecourts. This trend is likely to continue into 2009, and will be exaggerated by the fact that manufacturers are expected to further restrict supply to hire-car firms, thus limiting used car volumes particularly in the second half of the year.
"Longer periods of retention will mean ex-rental cars could have around 20,000 miles on the clock, rather than the more typical 14,000. Whether this suits potential car buyers remains to be seen," concludes Rushmore.
Bush unveils $17.4bn car bail-out
President George W Bush said allowing the US car industry to fail would not be "a responsible course of action".
Carmakers will get $13.4bn in short-term financing from the $700bn Wall Street bail-out, and another $4bn will be provided later.
The government set a deadline of 31 March for the firms to become viable, officials said.
"The American people want the auto companies to succeed and so do I," said President Bush.
However, he said that US carmakers must make hard decisions as the industry needs to be reformed.
The restructuring would require "meaningful concessions from all involved in the auto industry", added President Bush.
'Critical situation'
Officials said that General Motors and Chrysler were expected to take up the loan offer immediately.
Ford, the third of the "Big Three" carmakers, is seen as a company that does not need the money at this stage.
A $14bn (£9.4bn) rescue failed in the Senate last week, raising fears of job cuts and a possible industry collapse.
All car firms have announced production cuts as the economic slowdown has slashed car sales.
Chrysler, Ford and GM have repeatedly warned that millions of jobs could be lost if the government does not agree to a package of loans to support the industry.
"These loans were desperately needed before the end of December because the situation for the automakers is so critical," said Dennis Virag at Automotive Consulting Group.
Lenders 'Cherry Picking' to improve margin
Independent automotive funding provider Southern Finance does not believe threats to banks by Government ministers will change their attitudes to loans for car purchase this winter.
Miles Roberts, managing director, said: “Over the last few months it has become increasingly difficult for lenders to raise enough funds at a competitive margin.
“The upshot has been cherry-picking of the most profitable deals.”
Chancellor of the Exchequer Alastair Darling and business secretary Lord Mandelson have urged banks to make money available to help kick-start the economy.
This follows massive government intervention to
provide tens of billions of pounds to safeguard inter-bank ending.
Roberts said the crucial question of liquidity, plus consolidation, meant the finance sector would probably never be the same again.
“The range of choice for point of sale finance has reduced significantly,” he said. “For motor retailers, this means only the very best customers are going to get it.
“So they’re either going to go elsewhere for the finance – such as with personal loans – at a loss of income for dealers or they’re not going to buy at all, which is an even bigger loss of income.”
Roberts said it was vital for dealers to choose a motor finance partner carefully, and not just to go for the best rate and commission.
“Make sure you understand the lending criteria and the appetite for risk, too.”
Rival Carlyle Finance is in defiant mood, with chief executive Mark Standish saying sales are more than 20% up on 2007, and further growth is planned in 2009.
“We’re working ever closer with our dealer customers to help them face today’s challenges,” he said.
Standish is urging dealers to be positive, asking them to consider how serious a 1.25% downturn (equivalent to UK GDP’s likely figure) would be to their businesses.
He said finance was still available from companies such as
Carlyle Finance, part of WesBank, South Africa’s largest car financer.
DATED: 19.12.08
FEED: AM
Gloomy outlook from HR Owen
Supercar specialist HR Owen expects to break even this year, as the recession hits sales of sports cars.
Its statement to investors this morning shows a distinct change in confidence following a national car sales slump in the last three months.
In September, chief executive Nick Lancaster, pictured, told AM he expected his supercar franchises to be buoyed through the downturn by the global super-rich with homes in London.
Today's statement predicts an operating loss, before exceptionals, from trading in the second half of the year.
Performance from the whole year, which included a profitable first half, looks like being around break-even, HR Owen said.
It has taken action to reduce the turn of its used stock, leaving it with "very low used vehicle inventories" at year-end, said the statement, and the group still holds positive cash balances and has available capacity with stock funding facilities.
The London-based dealer group has showrooms for Ferrari, Maserati, Bentley, Rolls-Royce, Bugatti, Lambourghini, Alfa Romeo and Volvo.
DATED: 19.12.08
FEED: AM
Lookers warn investors of profit hit
"Lookers said its restructuring programme is ahead of plan. By the end of the year it will have closed 21 dealerships, which combined with other rationalisations will achieve £7.5m of annual cost savings."
Analsyst had forecast £15-18m originally, and the comparable profit figure for 2007 was £24.5m. Given the market outlook and forecast for 2009, Lookers is not recommending a dividend.
"The company continues to be cash generative reflecting its operating performance and the tight control of working capital," said its statement.
It is complying with its financing arrangements and is currently engaged with its finance providers to ensure that these remain appropriate for the anticipated market conditions in 2009.
Lookers said its restructuring programme is ahead of plan. By the end of the year it will have closed 21 dealerships, which combined with other rationalisations will achieve £7.5m of annual cost savings.
Strong focus remains on its aftermarket businesses, and used car volumes and margins have begun to increase, although remain below previous levels.
GM & Chrysler secure billions in aid
Some $13.4 billion will be made available in December and January from the $700 billion fund that was originally designed to rescue struggling financial institutions, but the loans would be called back if the automakers cannot prove they are viable by March 31, a U.S. government official said.
Viability would be mean that the companies must have a positive net present value, which doesn't necessarily mean immediate profitability but would require them to reach that point relatively soon, the official said.
The three-year loans would require limits on executive compensation and other perks, and the automakers would also have to provide warrants for non-voting stocks. ...
Gilles Michel leaves PSA
Michel will quit the carmaker to run the French government's new strategic investment fund.
Michel, 52, has been a rising star within PSA's upper-management team since joining the company in 2002 as head of platforms, technical affairs and purchasing. He has run the Citroen brand since 2007 and is a member of PSA's five-person managing board.
PSA had no official comment on Michel's resignation, but company sources said Michel's new appointment decision could be finalized late Friday after a board meeting of the fund.
Thursday, December 18, 2008
Management restructure at Marshall Motor Group
The new chief executive of Marshall Motor Group has overhauled its management structure six weeks into the role.
Daksh Gupta has moved the business away from a traditional regional structure to one based on directors responsible for particular franchises.
Gupta has appointed Adrian Lewis, Chris Sheppard, Mark Furniss and Neal Owen as franchise directors, joined by Paul Atkinson in an interim role.
Gupta said: "All of these individuals have remarkable reputations in this industry and together they bring us a balanced pool of expertise in all of the important disciplines.
Proven success
"They also have extensive experience, at a senior level, of looking after important manufacturer relationships."
A similar structure proved to be successful at Inchcape Retail and Ridgeway Group, where Gupta previously held senior positions.
Gupta has also appointed Sue Porter as Marshall's director of sales process, finance insurance and warranty.
The new arrivals join Marshall's existing board of finance director Francis Laud, HR director Carole Minter and business development director Christopher Walkinshaw.
DATED: 18.12.08
FEED: AM
First year of SAF pulls in 5,800 Dealers
Specialist Automotive Finance (SAF), an initiative from the Finance and Leasing Association (FLA), has had 5,800 dealers and finance company representatives register for its online competence test in its first full year in operation.
Reference material, which helps people prepare for the SAF test, has been updated to reflect regulatory changes including amendments to the Consumer Credit Act.
The assessment is designed to be retaken annually to make sure candidates remain on top of the latest industry changes.
Paul Harrison, head of motor finance at the FLA, said: “The improved professional standards provided by SAF will help make sure consumers are given the most appropriate information available.
“Raising consumer awareness of the finance options in the showroom and their benefits could make a big difference for dealers in current market conditions.”
DATED: 18.12.08
FEED: AM
Manufacturers rethink 2009 PCP strategy
Many manufacturers are currently putting PCP programmes through reviews as they work out strategies for 2009. Incentives need to be attractive enough to appeal to buyers, while producing a realistic return.
Subaru UK will focus next year’s PCPs on high residual values for diesel boxer engine derivatives, said International Motors Fin-ance brand manager Joe Vasey. The PCPs are financed through Bank of Scotland.
GM UK denied speculation that Saab is dropping all PCPs from January – it has a 2.9% APR programme on 9-3 TTiD derivatives until December 31. Offers for 2009 Q1 have not been finalised, said a spokeswoman.
PCPs have worked well for most carmakers. In a recession, they offer retail customers the chance to run a car on a strict budget, and to hand it back after three years.
For dealers PCPs are valuable as a way of persuading buyers to visit showrooms.
Brave new world for POS
As we hurtle towards the end of the year, it’s worth reflecting on the past 12 months and taking a look towards 2009.
Massive changes have impacted on our industry during 2008, which saw motor sales fall dramatically – it shows no signs of relenting in 2009.
I am aware of the cyclical trends in our business, particularly as motor finance has been through a period where profits have been skewed in favour of dealers.
With the significant changes in the credit market and, in particular, the need for finance providers to fully price in their risk and cost of capital, we are seeing a return to a more balanced position.
This means there is a greater need for dealers and finance providers to work together more closely to address the challenging issues ahead.
However, it’s not all doom and gloom. There are encouraging signs that point of sale (PoS) is staging a comeback.
It was recently reported that dealer finance penetration for new cars has risen from 46.2% to 50.9% over the 12 months to August.
A big challenge for dealers will be persuading their customers that PoS finance is a very attractive alternative to a high street loan. It is crucial to convince customers that credit has risen across the board.
During these tough times, reputations and relationships are key, and dealers should be comforted in dealing with a trusted market leader like Black Horse.
Innovative approaches to marketing finance, such as our Rate for Risk model, ensure that PoS is not just for ‘elite’ customers and opens it up to a wider audience.
To exploit current opportunities, dealers must sell PoS finance assertively and focus on developing customer relationships. Customers should be drawn to the overall benefits of PoS finance, rather than simply focusing on the rate.
I genuinely believe this gives us cause for optimism in the year ahead. Only by working together with dealers to offer the consultative support, products and services which fit with today’s marketplace, can we hope to lay the foundations for a more profitable 2009.
DATED: 18.12.08
FEED: AM
Honda slashes its profit forecast
Japanese carmaker Honda has cut its annual profit forecast by 62% amid falling global car demand and the soaring yen.
The second-largest carmaker in Japan now expects 185bn yen ($2.1bn, £1.4bn) in net profit for the year to the end of March 2009.
In the previous financial year, Honda made a net profit of 600bn yen.
The yen has jumped to a 13-year high against the dollar, hurting carmakers among other Japanese exporters.
Carmakers around the world have been announcing output and job cuts, and leading US carmakers have been trying to persuade the government to approve a car industry bail-out.
In recent weeks, Honda hasannounced further cuts in production in Japan and Europe.
So far, the firm reduced its global annual output by about 200,000 vehicles due to the economic downturn.
Honda has also said it was pulling out of Formula One, blaming the world economic crisis for plans to sell its team.
Wanted: Quality used cars
Buyers hunt out no frills used cars at the right price
As the UK gets to grips with a collapsing new car market, HPI, the vehicle history check experts, reports that the looming recession is affecting the way consumers think about used cars. More and more car buyers are prepared to forego the latest gadgets in favour of bagging a bargain. So although the current market looks gloomy, the latest HPI Used Car Valuations Index suggests smart buyers are shopping around for no frills used cars at the right price.
Martin Keighley, HPI's Used Car Valuations expert says now is the time to buy for consumers looking to downsize: "With new cars out of reach, we are seeing more buyers looking for top quality used cars. And many families that have in the past run two or more cars have and are continuing to cut back. The changes are often from a 4 door saloon or 5 door hatch and a sports or coupe as the second car, to one vehicle that will cover the practical needs of a family.
"However, there is a scarcity of quality used vehicles around. Reliance on credit has created a use and throwaway society, meaning used cars, when they come to the market, are often in poor condition. The knock on effect has been a shortage of cheaper, older and clean cars. The problem will get much worse, especially as 4x4 and larger vehicles are slipping to values where they are practically un-saleable. Because of this, many owners will simply run them into the ground.
"What we are seeing is that models that have been undesirable in the past, such as medium sized Estates with values the same or less than their hatchback counterparts, are now finding buyers looking for practical alternatives. For example, the Ford Focus and Vauxhall Astra estates cost the same to run but are much more practical, and as such we expect values to stabilize on these. Furthermore, it's just possible clean four, five and six year old models may soon start to hold their value and even increase as this pressure is brought to bear."
Overall, used car prices continue to slip with year on year valuations 24.6% lower in November than the same time last year for all 12 month old cars. The decline is even more pronounced with three year old models now worth a staggering 29.1% less than in 2007. Both fuel types have fallen over 23% year-on-year in the case of 12 month cars, with 36 month old diesels outshining 36 month old petrols slightly with a fall of 27.2% compared to 30.5%.
Comparing figures month-on-month, November's decline against October is a further 5.1% and 5.4% for 12 and 36 month old cars respectively, offering no let up for the beleaguered industry.
Concludes Keighley: "A shortage of used quality stock means that demand is currently outstripping supply. This is mainly due to owners either hanging onto their car until the economy becomes more stable, or they are selling on privately to someone they know or through the classifieds, bypassing dealers altogether."
Car industry to focus on crisis
Car industry bosses are meeting in Birmingham to discuss the manufacturing crisis that could affect up to 90,000 jobs in the region.
Representatives from about 70 car component making firms in the West Midlands are due to attend the city's Chamber of Commerce suppliers' forum.
Organisers said the aim was to get a regional snap shot of the problems in lending, production and job losses.
MPs are due to discuss the wider UK car making crisis in Parliament later.
Job losses
The event is being hosted by Accelerate - a business support agency for the automotive industry, Business Link West Midlands and the Manufacturing Advisory Service at Birmingham Chamber of Commerce.
It comes after component makers and car manufacturers met the Business Secretary Lord Mandelson last month to discuss fears over the future of the automotive industry in the region.
Accelerate estimates up to 90,000 jobs across the region could be affected by the automotive industry crisis. Seven of the biggest UK car component suppliers are based in the West Midlands region.
Last month Jaguar Land Rover announced 850 job losses at its plants in Castle Bromwich in Birmingham, and Solihull, and research and development centres in Whitley, Coventry, and Gaydon in Warwickshire.
Aston Martin also announced that 600 jobs would go at its plant in Gaydon.
'Firsthand insight'
Component suppliers, such as Barton Cold Form in Droitwich, in Worcestershire, said a reduction in orders was having a disastrous impact on their business.
Rachel Eade, from Accelerate said: "There is so much information flying around the shop floor and the factories it is difficult to gain a full picture of what is going on out there.
"This forum will provide a firsthand insight into exactly how companies are coping and, importantly, what we can do to help.
Richard Crooks, of Business Link in the West Midlands said: "The automotive sector is an integral part of our regional economy and we need to ensure that the skills we have built up over many years are not lost for the future."
Lenders look at rescue for Pendragon
Lenders to highly indebted Pendragon, the UK's largest dealership group, are attempting to come up with an innovative way to rescuer the company which could avoid the need for a debt-for-equity swap.
Banks are thought to be looking at a scheme that would see the company's worst performing businesses liquidated. Pendragon owes around £287 million and the banks are looking at ways of wiping out the liabilities to get their money back.
Pendragon says it is not in any difficulty in repaying borrowings.
Shockwaves sent by Solent closure
The sinking of the Solent Motor Group has sent shockwaves through motor retailers along the south coast.
It has left staff and directors “totally devastated”, managing director Mike Miller told AM.
Before its collapse last week, Solent sold Citroën, Nissan and Mazda from three prime sites, within 600 yards of each other, along the main artery into Portsmouth. The operational territory included Gosport, Fareham, Havant and Emsworth.
More than 100 staff were employed at the £28 million turnover group until the economic downturn struck.
“We did everything in our power to save the company,” Miller said. “We cut back employees to 73 in a bid to get back on track but it was impossible.
“The motor industry is in a terrible state at the moment and I believe it will not return to better times for something like 12 months.
“For us it has been a nightmare and it will take a while to sort out all the financial matters, but I know that Citroën, Nissan and Mazda will each work with customers to ensure ownership and payment issues are resolved.”
Miller started the Citroën franchise 16 years ago, added Nissan five years later, then Mazda in 2002. He pledged that outstanding pay to his “great and loyal” staff would be honoured along with redundancy owed once the liquidator, Vantis, has finished work.
“We are doing everything by the book,” added Miller. “Most of the cars involved are owned by the finance company, Royal Bank of Scotland.”
Solent was a private concern – like most car dealers currently operating in the Portsmouth region.
Pendragon has a Vauxhall site opposite Solent Citroën, but family businesses have long been the mainstay of the motor trade in the area.
“I built up Solent from nothing,” said Miller. “I had staff who were fantastically committed and hard-
working and they were great to work with, but there was just no hope given the downturn in the industry. It is very, very sad.”
Mazda, Nissan and Citroën all said the collapse was disappointing and Solent had served them well. Nissan said Portsmouth is now an open point and it is looking for new representation.
Miller’s final words to AM: “I need a job – know of any going?”
Fiat to link with PSA ?
Fiat is apparently looking to team up wth PSA Peugeot Citroen, according to an Italian newspaper.
Milano Finanza says the Italian prime minster's office has been looking into a potential aid package for the country's automakers by working with French president Nicolas Sarkozy on a possible partnership with PSA.
The prime minister's and president's offices have refused to comment on the report.
In the past PSA has said it is in favour of deepening existing relationships, although it wasn't looking to add another member to its alliance.
DATED: 18.12.08
FEED: AM
Tozer quits to join Dealer Group
Veteran Mitsubishi executive Genishiro Nishina will succeed Tozer as the company's European boss on December 23, the carmaker announced Tuesday.
Currently, Nishina, 55, is Mitsubishi Europe's head of product marketing management. Nishina has 10 years experience in European assignments, Mitsubishi said.
Tozer, a 49-year-old British native, has been head of Mitsubishi's European operations for the past four years. He will become CEO of AutoBinck Holding starting February 1.
Tozer said: "It is a big challenge to channel and shape the full business potential of AutoBinck."
Tozer will succeed Henny J.C. van Dijk, who retired as AutoBinck CEO in July.
VW & Porsche Unions make peace
The move resolves one issue in a dispute between Porsche and VW over Porsche's plan to control VW, Europe's biggest carmaker.
Osterloh, who is head of VW's works council, has been demanding more workers' rights in Porsche Automobil's works council.
Osterloh claimed Porsche aims to create a two-class system in which 12,000 Porsche employees outrank VW's 360,000 workforce.
Porsche Automobil's 40-member works council will now have 20 employee representatives each from VW and Porsche.
But VW's votes will carry greater weight reflecting the carmaker's larger work force, a Porsche Automobil spokesman said.
Inchcape issues profit warning
Shares in car dealer Inchcape have fallen by 28% after the company warned that 2009's profits would be "significantly" below expectations.
It said a "rapid and unprecedented decline" in business across its markets made it difficult to forecast results.
Like-for-like sales for the first 11 months of this year had been down 4.9% on a constant currency basis, it said.
Inchcape added that the decline in new car sales had accelerated in November in most parts of the world.
In morning trade, Inchcape's shares were down 19.75p, or 28%, at 51p.
'Substantial' decline
Inchcape sells luxury marques including Mercedes Benz, Audi and BMW. It operates in 25 countries, with its core markets including the UK, Singapore, Australia, Hong Kong, Greece, Belgium, Russia and China.
"In most of our markets we now expect more substantial sales declines than previously estimated due to the global recession and significant reduction in credit availability," the company said.
"We would expect our underlying results for 2009 to be significantly below our previous expectations."
Car sales have fallen as the economic downturn has led consumers to cut back on spending.
In the US, the big three carmakers - Ford, General Motors and Chrysler - have been seeking billions of dollars of loans from the government.
Help urged for UK motor industry
Union bosses have joined calls for the government to urgently give financial support to the UK's car industry.
With global sales tumbling, carmakers want a substantial financial package from the government to help them through the tough economic climate.
Senior motor industry figures met with ministers last month to appeal for assistance during the downturn.
But there is uncertainty over whether any substantial help will be offered, amid fears of major job losses.
About 850,000 people work in the manufacturing and supply sides of the UK auto sector.
And the Sunday Times quoted one unnamed senior car industry executive saying that he feared the worst if intervention did not come soon.
"There will have to be layoffs, and there is a real danger of a clearout among component makers, who are finding it more and more difficult to get funding," they said.
Among the requests put to government are a state-guaranteed credit facility, more credit for manufacturers and suppliers, easier access to cash for car finance firms and a delay in the rise in vehicle excise duty.
"There is no doubt in my mind that it was the banks and the bankers who created this problem but we must not allow UK manufacturing to be hit further by this," said Tony Woodley, joint leader of Unite.
"If it was right to bail out the banks, and it was, then it is right to aid manufacturing. This is not like the US where drivers are in love with gas guzzlers and big vehicles.
"UK manufacturing is productive and efficient but our market has collapsed. We need short-term financial support to keep companies alive until the market picks up again."
The Sunday Times reported that the government was now set to offer a string of measures to try and kick-start sales.
Loan guarantees for car firms' finance arms and low-cost loans are expected to be offered, the paper said.
However according to the Mail on Sunday, Treasury sources said there were no firm proposals for an urgent rescue package for the embattled sector.
This week car manufacturer Vauxhall has offered its workforce at one plant the chance to take a sabbatical on 30% pay.
General Motors approached unions at the plant in Ellesmere Port, Cheshire, with the plan.
Under the scheme, staff would stay away from work for up to nine months between January and September 2009 on less than a third of their basic salaries.
A spokesman said the company wanted to avoid making any compulsory redundancies.
In the US, the White House says it is considering using money earmarked to rescue the US banking industry to bail out the country's "Big Three" carmakers.
It followed a $14bn (£9.4bn) bail-out deal for the US car industry which failed to get Senate support, raising fears of job cuts.
The White House said a disorderly bankruptcy in the motor industry would be a huge blow which the US economy could not withstand.
Meanwhile General Motors said it was temporarily stopping some production. And Honda is also to cut back output in North America.
Last month the European Commission proposed to give at least five billion euros to the car industry to help develop green technologies.
US car bail-out fails in Senate
A $14bn (£9.4bn) bail-out deal for the US car industry has failed to get Senate support, raising fears of job cuts and a possible industry collapse.
Bipartisan talks on the rescue plan collapsed over Republican demands that the United Auto Workers (UAW) union agree to swift wage cuts.
The White House said the plan was American carmakers' "best chance to avoid a disorderly bankruptcy".
Shares fell sharply around the world on the news.
Japan's Nikkei share index fell 484.68 points, or 5.6%, to 8253.87, with carmakers among the hardest hit. Shares in Toyota, Honda and Nissan all fell by at least 10%.
German, French and UK stocks all opened lower on the news, with the FTSE-100 index of leading shares down 176.3 points at 4,211 at midday.
Some Democrats have now called on President Bush to use some of the $700bn bail-out earmarked for Wall Street to help the car industry.
Tense and emotional
The Republicans left the closed-door meetings after the UAW union refused to cut wages next year to bring them into line with their Japanese counterparts. UAW's current contract with the car makers expires in 2011.
"We were about three words away from a deal," said Republican Sen Bob Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."
Alan Reuther, the UAW's legislative director, declined to comment to reporters as he left a meeting room during the negotiations, according to the Associated Press.
The BBC's Andy Gallacher in Washington says it was always going to be a battle to get the US Senate to approve the $14bn bridging loan.
With a majority of just one in the Senate, the Democrats needed some Republicans to back the bill as some in their own party were expected to vote against it.
The atmosphere in the Senate was tense and at times emotional, our correspondent says, as the Democrats made last-minute pleas to get their Republican counterparts to vote in favour of helping America's biggest car domestic makers, Ford, Chrysler and General Motors.
Millions affected
The three companies employ 250,000 people directly and the failure of the bail-out raises the prospect of huge job losses.
The Senate majority leader, Harry Reid, said he was "terribly disappointed" when it became clear the vote had collapsed, calling it "a loss for the country".
"Millions of Americans, not only the auto workers but people who sell cars, car dealerships, people who work on cars are going to be directly impacted and affected."
White House spokesman Tony Fratto said the government would evaluate its options in light of the collapse of the negotiations, but did not elaborate.
"We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable," he said.
Some Democrat politicians have called on President Bush to use some of the $700bn bail-out for Wall Street to help the car industry.
Help needed
The deal would have given the Big Three carmakers access to emergency funding to help them cope with the sharp downturn in sales because of the global financial crisis.
General Motors and Chrysler have said they risk ruin without immediate aid. Ford says it may need funds in the future.
The bosses of the three firms had previously asked for $34bn from Congress.
They have all seen sales fall sharply this year in the US, partly reflecting an industry-wide fall, and partly because their large gas-guzzling vehicles are no longer what customers want.
Chinese favourites to take control of Volvo
One of China's largest carmakers, Changan, is in talks with Ford Motor Company that could see it buy Volvo.
Ford announced last week that it was looking at all options for the future of Volvo as it bids to raise cash to see it through the economic crisis.
Changan is China's sixth largest vehicle manufacturer and is a joint venture partner with Ford in China.
It is understood that talks between the two sides first started a months ago. If the sale goes ahead, it will mark Ford's complete exit from European brands. Over the past two years it has sold Aston Martin, Jaguar and Land Rover.
Volkswagen taps German government for loan guarantees
Volkswagen has become the first German carmaker to seek to tap the country's ?500 billion government-backed backing rescue plan, highlighting the global spread of the economic crisis facing the motor industry.
Europe's largest carmaker said its affiliates, Volkswagen Bank and Volkswagen Financial Services, had applied for state guarantees that would cover loans for refinancing.
US House backs car industry plan
The US House of Representatives has approved a $14bn (£9.4bn) bail-out of the US car industry.
The vote came after the White House and leading Democrats reached broad agreement on the rescue package.
The bail-out could be delayed as it faces stiff opposition from Republicans in the Senate, where the Democrats have a razor-thin majority.
General Motors and Chrysler say they risk ruin without immediate aid. Ford says it may need funds in the future.
The legislation would provide loans to car makers to keep them in business over the coming months.
It would also see the appointment of a "car tsar", named by President George W Bush, to oversee the money, and with the power to force the automakers into bankruptcy if they did not restructure their businesses to become viable.
The government is also expected to take non-voting shares in General Motors, Ford and Chrysler.
The "Big Three" automakers have until 31 March to submit plans to the "car tsar" detailing how they intend to restructure to ensure their longer-term survival, the Associated Press news agency said.
The three firms had called for $34bn between them when their bosses recently went before Congress to put their case.
'Weak bill'
Democratic House Speaker Nancy Pelosi said the measures would act as "a jumpstart for an industry and our country's economic health".
"It is a test," she said after the House passed the bill by 237-170. "And we will soon see in a matter of weeks if the executive suites in Detroit are willing to make the choices" offered by the bail-out package.
White House spokeswoman Dana Perino said: "We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs."
Senate Republicans have promised to oppose the bill.
"People realise that this bill is an incredibly weak bill [and] is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Tennessee Senator Bob Corker.
Republicans are said to prefer a plan that would demand concessions from auto-workers, encourage the car firms to declare bankruptcy and provide a system of government insurance that would protect private investment in the firms.
This follows criticism that the $700bn bail-out of the financial sector was insufficiently detailed.
'Disappointed'
GM, Ford and Chrysler have all seen sales fall sharply this year in their home market.
While this decline reflects an industry-wide fall that has also hit European and Japanese carmakers in the US, the Big Three have also been criticised for not offering an attractive range of vehicles.
They have been said to be too slow in responding to the growing popularity of smaller, more fuel-efficient vehicles.
GM admitted on Monday that it had "disappointed" American consumers by letting "our quality fall below industry standards and our designs became lacklustre"
