Ford Motor president and chief executive officer Alan Mulally says no one could have predicted a 40 per cent fall in sales that happened in the first nine months of 2008. - File

Detroit's Big Three automakers are begging the United States Congress for a US$25-billion government rescue, while the legislation clings to life support on Capitol Hill and top lawmakers and the White House suffer from bail-out fatigue.

Democratic congressional leaders want to tap the US$700-billion Wall Street rescue package for new loans to US auto manufacturers and suppliers, but the White House and Republican lawmakers say the beleaguered industry shouldn't get any new funds.

President George W. Bush and GOP lawmakers instead propose diverting US$25 billion in loans approved by Congress in September - designed to help auto manufacturers retool their factories so they can make more fuel-efficient vehicles - to cover the firms' immediate financial woes.

But auto executives, backed by leading Democrats, insist they need another US$25 billion in emergency loans to avert a collapse of one or more of their companies before year's end.

That would bring the total federal help for the industry to US$50 billion this year.

The executives, along with the head of the United Auto Workers union, were making their case Tuesday at a hearing before the Senate Banking Committee as auto bail-out backers hunted the votes necessary to pass the plan in a post-election session.

Could run out of cash

Aides in both parties and lobbyists tracking the plan privately acknowledge they are far short.

The debate comes as the financial situation for General Motors Corp, Ford Motor Company and Chrysler LLC grows more precarious. GM has said it could run out of cash by year's end without government aid.

"They're going to need to address what is the perception among some of our colleagues here that there's still some quality issues with the Big Three, and they haven't begun to do the necessary restructuring - because they have," said Senator Carl M. Levin (Democrat, Michigan), an architect of the bail-out.

Ford CEO Alan Mulally argued Tuesday in advance of the hearing that his company already been labouring to "transform our business" into a more profitable one that meets 21st-century demands for fuel-efficient vehicles.

Interviewed on ABC's 'Good Morning America', Mulally denied that automakers resisted restructuring their companies to meet current marketing realities.

He also took exception to assertions the company had been badly managed, saying that "if everybody can remember, we had gotten back to profitability in the first quarter of this year ... None of us ever anticipated that we'd be in a world where our sales in this industry have fallen by 40 per cent in the first nine months. "

Profit from future gains

Levin's bill would provide loans with initial interest rates of 5.0 per cent to US automakers and suppliers in exchange for a federal stake in the companies or warrants that would let the government profit from future gains.

Loan applicants would have to give the government a plan for "long-term financial viability."

But the measure stops short of giving the government a say over the firms' operations through an oversight board or hard limits on executive compensation. While taking advantage of the programme, the companies could not pay dividends, award bonuses to executives making more than US$250,000 a year, or give golden parachute payments to top people departing from the firms.

A vote on the measure, which includes an extension of jobless benefits, could come as early as Thursday.

But in an acknowledgement of the long odds facing such a plan, Majority Leader Harry Reid (Democrat, Nevada) also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

The Senate auto bail-out bill notes that 355,000 US workers are directly employed by the auto industry, and an additional 4.5 million work in related industries.

Health-care benefits

That doesn't count the one million retirees, spouses and dependants who rely on the firms for retirement and health-care benefits.

Critics argue that the industry's business practices - including lavish pay and benefits packages for auto workers - have created unsustainable costs for the faltering companies that can only be solved with bankruptcy.

"I can't see how injecting capital with all the legacy issues that each of these companies has is better than reorganisation," said Senator Bob Corker (Republican,Tennesse).

- AP