WASHINGTON (AP) — Labour, lawmakers and the auto industry bargained in unprecedented private talks at the Capitol last night, claiming progress in a common struggle to salvage a $14 billion government bailout of the nation's Big Three carmakers.

"We're closer to agreement," Senate Majority Leader Harry Reid of Nevada said after several hours of negotiations.

Officials said the talks centered on possible wage and benefit concessions from the United Auto Workers union as well as large-scale debt restructuring by General Motors Corp., Ford Motor Co. and Chrysler LLC.

It was not clear how far the participants were willing to go to seal the federal aid that General Motors and Chrysler said was essential to keep them from bankruptcy. Ford is in better financial shape than its rivals, although its survival is not assured, either.

The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to a White House-backed rescue bill that was approved by the House a day earlier. He called for an alternative that would reduce the wages and benefits of US autoworkers to bring them in line with those paid by Japanese carmakers Nissan, Toyota and Honda in the United States.

Sen. Bob Corker of Tennessee took a leading role in the closed-door talks for Republicans.

"The meetings have gone very well," he said as he ducked out at one point. "We've got some issues to work out."

When he re-entered the talks a short while later, industry representatives had departed, leaving only the UAW and lawmakers.

Sen. Chris Dodd of Connecticut, chairman of the Senate Banking Committee chairman, was the point man in the talks for Democrats, who count labor unions among their strongest political allies.

The negotiations marked the latest development in a long-running debate over bailing out the beleaguered auto industry. The issue gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

The White House monitored the talks but was not directly participating. Administration officials had been deeply involved in recent days in drafting a compromise with House and Senate Democrats — the measure that McConnell and other Senate Republicans promptly repudiated.

Reid said at one point he hoped votes could be held by night's end, but there was no timetable.

A growing number of Republicans and Democrats were turning against the House-passed bill — despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

The White House said Bush was calling Republican lawmakers, while Obama told reporters at a news conference in Chicago an industry shutdown would have a "devastating ripple effect" on the already ragged economy.

The House-passed bill would create a Bush-appointed overseer to dole out the money. At the same time, carmakers would be compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring. McConnell said that measure "isn't nearly tough enough".

Pushing to convert sceptics in both parties, Democrats agreed to drop at least one unrelated provision that threatened to sink the measure, a congressional official said. They were eliminating a pay raise for federal judges after Democratic Sen. Claire McCaskill of Missouri, who represents an automobile manufacturing state, announced she would oppose the carmaker aid unless that provision was removed.

Supporters had an uphill battle pressing the rescue package on a bailout-fatigued Congress — particularly a measure designed to span the administrations of a lame-duck president and his successor. Forced together by growing economic turmoil, the incoming and outgoing presidents were united in pressing hard for swift approval.

Earlier, just after the Labor Department reported new applications for jobless benefits were at their highest level in 26 years, White House Press Secretary Dana Perino said the country couldn't afford an auto industry meltdown.

Before the late-day negotiations, patience had begun wearing thin at the Capitol as lawmakers looked ahead to adjourning for the holidays.

Reid at one point called for swift separate votes yesterday on compromise legislation backed by Democrats and the White House as well as the GOP proposal. If not, he promised a test vote this morning to force a final up-or-down decision within days.

"We have danced this tune long enough," Reid declared.

But many Republicans remained staunchly opposed to the rescue, and some Democrats were ill or absent from the emergency, post-election congressional session. Supporters of the bailout acknowledged that in this scenario, getting the needed 60 votes to pass it would be very difficult.