The Obama administration has turned down a request by auto-parts suppliers for up to $10 billion in new aid, concluding that the government shouldn't further interfere in the industry's contraction.

In rejecting the request late last week, the Treasury Department appears to have drawn a line in how much taxpayer money it is willing to spend on saving the U.S. auto industry. The move also indicates that the administration is confident that its multibillion-dollar effort to save General Motors Corp. (GMGMQ) and Chrysler LLC has stabilized the car industry.

Neil De Koker, president and chief executive of the Original Equipment Suppliers Association, said Obama adviser Ron Bloom turned down the suppliers' request in a meeting last week.

Bloom and several of his staffers told De Koker "that consolidation for the industry needs to take place."

"'We all recognize that and we don't think that having a general program of assistance to all suppliers would help that, nor is needed at this time'," De Koker, in an interview with Dow Jones Newswires, recalled them saying.

Bloom added that the administration didn't feel that the prospect of more supplier bankruptcies in coming months posed a systemic threat to the auto industry, De Koker said.

"They felt that, unless we see chaos or a disorderly situation arising where we have assembly-line shutdown due to lack of ability to get parts or stuff like that, then we would relook at this situation, but that at the present time we believe everything is working," De Koker said.

A Treasury spokeswoman said this week that "at this time, no changes have been made to funding."

The administration "will continue to monitor the situation," she said in a statement.

Auto suppliers had asked for the government to guarantee between $8 billion to $10 billion in loans so banks will lend to the suppliers. The aid would be on top of a $5 billion support program for suppliers that the administration put in place earlier this year.

Trade groups warned that hundreds of suppliers could collapse without further government aid as the bankruptcy filings of GM and Chrysler deepen the suppliers' troubles.

The administration's rejection may prompt Congress to act.

A U.S. senator said Tuesday he planned to introduce legislation to provide more aid for auto-parts suppliers.

Sen. Sherrod Brown, D-Ohio, said in a statement that the proposed legislation would "provide a new funding source to help auto suppliers and other manufacturers retool for the clean energy industry." He plans to unveil the proposal Wednesday on Capitol Hill.

The plan, which Brown said has the support of business, environmental and labor leaders, would aim to prevent a wave of bankruptcy filings by parts companies while helping them retool to build more fuel-efficient cars.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@dowjones.com

(Jeff Bennett contributed to this report.)