By Thomas Ferraro and John Crawley
WASHINGTON (Reuters) - The White House and congressional Democrats were finalising on Monday a $15 billion (10 billion pound) proposal to bailout automakers, a plan that will carry stiff conditions to sell the package to lawmakers.
Negotiators worked through the weekend, trading plans and crafting language to legislation that will face its most crucial test in the 100-member Senate where it must receive 60 votes to overcome procedural hurdles. The chamber will reconvene later on Monday. The House of Representatives is due back on Tuesday.
White House spokeswoman Dana Perino said progress had been made over the weekend but the White House had not yet been shown the language of any legislation.
A senior Republican aide predicted Congress would approve some relief, but the official added that lawmakers anxiously awaited details and there could be efforts on both sides of the aisle to slow down the plan.
"But I assume it will get through relatively easily," the aide said. "I have a hard time believing we get out of here without doing something."
The proposal mainly will be directed at preventing the threatened collapse of General Motors and Chrysler which both want billions in low interest loans by month's end. Ford is seeking a line of credit to be tapped if finances worsen more than expected in 2009.
The loans would carry automakers into 2009 after which a detailed restructuring would be considered by the Obama administration, which takes office January 20, congressional and industry sources said.
Restructuring plans would be due by March 31 to avoid defaulting on loans, the sources said.
GM seems headed for a wrenching restructuring that will hit its investors, creditors, dealers and workers almost as hard as if the top U.S. automaker had sought bankruptcy.
CONSUMER BETRAYAL
The No.1 U.S. automaker unveiled an unusually frank advertisement on Monday acknowledging it had "disappointed" and sometimes even "betrayed" American consumers by letting "our quality fall below industry standards and our designs became lacklustre."
Ford stock was up 13.6 percent to $3.09 in mid-morning trading, while GM was 14.7 percent higher to $4.68, both on the New York Stock Exchange.
On Sunday, the lead senator on the bailout legislation, Banking Committee Chairman Christopher Dodd, said it was time for GM Chief Executive Rick Wagoner to step down. "I think it's clear GM is in the worst shape. Chrysler is, I think, basically gone," Dodd said on CBS's "Face the Nation."
He said GM and Chrysler should probably merge. The two explored that possibility already and have told lawmakers they would revive talks if it would help secure bailout cash.
If a merger is revived, analysts expect up to 40,000 more job cuts. GM, Chrysler and Ford employ nearly 250,000 people, two thirds represented by the United Auto Workers.
The UAW is open to moves by Chrysler to seek an alliance with a rival provided that it preserves as many jobs as possible, a senior union official said on Sunday.
The grim outlook for automakers was not just limited to the United States. Italian carmaker Fiat says it is too small to survive alone, drawing attention to the prospect of mergers. Sweden reportedly mulled a rescue package for Volvo and Saab.
Daimler said its main plant would adopt a shorter work week for three months and Toyota was said to be eying spending cuts of up to 40 percent.
Fiat's chief executive Sergio Marchionne was quoted as saying over the weekend that only six big players would be left in the world after a phase of consolidation, which he expects to start next year. [ID:nL8643140]
Democratic Sen. Carl Levin of Michigan said on Sunday he was confident there would be a deal for U.S. automakers but was not willing to say yet that Senate support was a certainty.
Many from President George W. Bush's Republican party are reluctant to approve another rescue plan after a $700 billion package they passed for Wall Street in October triggered a voter backlash in the November elections.
CONDITIONS ATTACHED
To win broad support for enactment, the plan will contain several conditions in addition to the March deadline for new plans, according to congressional and industry sources.
One provision would place oversight under a board comprised of multiple cabinet agencies. It would be led by a trustee, or "auto czar."
The plan also will seek taxpayer protections in the form of preferred shares for the government and a prohibition on shareholder dividends. Neither Ford nor GM pay dividends now.
Interest on loans would be 5 percent for five years and 9 percent after that, the same conditions Democrats proposed in an earlier bailout attempt.
Democrats also are pushing for automakers drop a legal challenge to a California law aimed at reducing green house gas emissions that could trigger a national move towards tougher auto fuel efficiency standards than industry faces now.
House Speaker Nancy Pelosi also insists that funds taken from an Energy Department program to bail out Detroit be quickly replenished to ensure industry takes steps to retool factories necessary to make more fuel efficient vehicles.
Some Republicans want deeper givebacks from labour than have already been announced as well as concessions from management, bondholders, suppliers and lenders.
Automakers and their political allies contend a collapse by the industry would cost up to 3 million jobs as suppliers, dealers and companies in related industries were hit in turn. Democrats said dramatic movement over the weekend was mainly in response to last Friday's startling jobless report.
"I have said repeatedly that to allow the auto industry to collapse precisely at a time when we are seeing record joblessness in unacceptable," President-elect Barack Obama said in Chicago on Sunday.
(Additional reporting by Rachelle Younglai, Donna Smith and Matt Spetalnick in Washington and Kevin Krolicki, Soyoung Kim and Poornima Gupta in Detroit; Deborah Charles reported from Chicago; Editing by Tim Dobbyn)
