The U.S. auto industry bailout plan has failed to pass through the Senate overnight, worsening the prospect that General Motors and Chrysler LLC may collapse.

Senate Majority Leader Harry Reid said quite simply that it would be a “very, very bad Christmas for many Americans”, dreading the repercussions of this decision on Wall Street.

Already in Asia, the Nikkei stock market has fallen by more than 5.5 percent, sparking only the first consequence of the failed bill.

The bailout plan received the majority vote; however fell seven votes short of the number needed to consider the measure.

This rejection leaves GM and Chrysler LLC in a difficult position, the time has come to take desperate measures in order to raise the combined $11 billion they say they need this month to stay solvent.

The stumbling block which prevented the plan from passing the Senate was a dispute over when UAW workers would consent to have their wages reduced to match those paid to non-union workers in U.S. import-brand factories – having rejected a 2009 deadline for the parity demand.

General Motors has said it may not have enough money to operate by year-end, a sentiment echoed by Chrysler LLC.

“We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis.” said a spokesperson for GM.

Economists and researchers have warned that a failure of one or more of the car companies will shatter a U.S. economy already in recession.

Together the Detroit 3 CEOs say they need at least $34 billion in federal money to get through the recession that has seen U.S. new vehicle sales drop to 25-year lows.

Ford said it doesn’t need immediate help but may need a $9 billion line of credit should the economy weaken further or one of its domestic rivals collapses.

One last hope remains for the bailout plan however, with Congress able to reintroduce the new legislation early next year when Democrats have a wider majority in the Senate.