Detroit bailout drive sputters on Capitol Hill

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By Kevin Drawbaugh and John Crawley

WASHINGTON (Reuters) - The U.S. auto industry's drive for a $34 billion emergency taxpayer bailout was stuck in neutral on Friday as the chief executives of Detroit's Big Three began a second day of testimony on Capitol Hill.

Amid fears that one of them might collapse and add to stunning job losses in the U.S. economy, General Motors Corp, Ford Motor Co and Chrysler Corp appealed again for help to lawmakers who are trapped in a political gridlock.

Broad consensus exists between Congress and the Bush administration that the automakers need help, but officials are refusing to budge from their views on how to do it, with some lawmakers opposed to doing anything at all.

The White House refuses to carve out for Detroit some of the $700 billion bailout it is already showering on Wall Street and the banks, saying that money is intended only to help stabilize the financial sector. It backs helping the automakers with $25 billion from an Energy Department loan program to promote fuel-efficient technologies.

But Congressional Democrats oppose this and insist the administration should help the automakers with money from the bank rescue fund, known as the Troubled Asset Relief Program (TARP).

In opening remarks at a House of Representatives Financial Services Committee hearing, chairman Barney Frank urged using the TARP funds, arguing that a collapse or bankruptcy of one of the automakers would devastate the financial sector.

"In the midst of the worst economic situation since the Great Depression it would be an unmitigated disaster," said Frank, a Massachusetts Democrat.

U.S. employers axed 533,000 jobs in November, the most in 34 years, the Labor Department said on Friday. The unemployment rate rose to 6.7 percent from 6.5 percent in October.

Congressional Democratic leaders would like to address aid for the auto sector in the House and Senate next week.

House Speaker Nancy Pelosi said earlier in the week that Congress or the Bush administration would have to act quickly to prevent the collapse of one or more automakers.

The warnings grew more ominous on Thursday before the Senate Banking Committee. "We could lose General Motors by the end of this month," Ron Gettelfinger, president of the United Auto Workers union told lawmakers.

GM said on Friday it will lay off 2,000 unionized workers and eliminate a production shift at three plants in Michigan, Ohio and Canada. Chrysler is also hemorrhaging cash.

Although struggling, Ford came to Washington in the best financial position but still worried about failure of a rival because of shared suppliers and other related businesses.

GM and Chrysler want immediate loans to forestall possible failure, while Ford is asking for a $9 billion credit line that would be tapped later if necessary. GM wants $12 billion in loans -- $4 billion now -- as well as a $6 billion credit line. Chrysler wants $7 billion immediately.

Chief executives Rick Wagoner of GM, Alan Mulally of Ford and Bob Nardelli of Chrysler testified before the Senate Banking Committee on Thursday.

(Reporting by John Crawley and Kevin Drawbaugh; Editing by Tim Dobbyn)

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