He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese carmakers.
Reid pushed for a test vote on the measure late Thursday night, in which it failed - as expected - to reach the 60-vote threshold it needed to advance.
Reid called the bill's collapse "a loss for the country," adding "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."
The implosion followed an unprecedented marathon set of talks at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.
"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.
Sen. Bob Corker of Tennessee, the GOP point man in the talks, said the two sides had been tantalizingly close to a deal, but the UAW's refusal to agree wage concessions by a specific date in 2009 kept them apart.
The autoworkers' contract doesn't expire until 2011.
"We were about three words away from a deal," said Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."
The stunning breakdown was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by President George W. Bush.
It wasn't immediately clear, however, how the auto aid measure might be resurrected.
Corker brought in the UAW to discuss a proposal that would reduce the wages and benefits of the Big Three automakers to bring them in line with those paid by Japanese carmakers Nissan, Toyota and Honda.
Earlier Thursday night, Reid had announced a tentative bipartisan agreement to move forward on the bailout.