Lawmaker warns of automaker job loss "disaster"

WASHINGTON (Reuters) - A senior U.S. congressional leader warned on Friday of an "unmitigated disaster" if a major U.S. automaker were allowed to collapse at a time when the economy is already losing jobs at an alarming pace.

With new data showing employers axed more than 533,000 jobs in November -- the highest monthly job-loss in 34 years -- Rep. Barney Frank urged the Bush administration to use money from a $700 billion bank bailout program to assist Detroit.

The financial system and the economy would be devastated if General Motors Corp, Ford Motor Co or Chrysler Corp were forced into bankruptcy or shutdown, said the Massachusetts Democrat who chairs the House Financial Services Committee.

"In the midst of the worst economic situation since the Great Depression it would be an unmitigated disaster," Frank said as the CEOs of the Big Three U.S. automakers testified to lawmakers for a second straight day.

Despite the grim economic outlook, the auto industry's drive for a $34 billion emergency taxpayer bailout was stuck in neutral with lawmakers 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 by modifying a $25-billion Energy Department loan program meant to promote fuel-efficient technologies.

President George W. Bush told reporters on Friday it was important for Congress to act next week on redirecting those energy loans.

DEMOCRATS TARGET TARP

But Congressional Democrats oppose this and insist the administration should help the automakers with money from the bank bailout -- the Troubled Asset Relief Program (TARP).

While U.S. leaders argued, other nations were moving to help their auto sectors.

The German government said on Friday it is looking at options to help GM's Opel unit and is on track to make a decision by Christmas.

Australia said local banks agreed to help the country's crippled car-financing industry with new funding worth A$2 billion ($1.3 billion).

U.S. employers axed 533,000 jobs in November, the most since 1974, the Labor Department said on Friday. The unemployment rate rose to 6.7 percent from 6.5 percent in October.

On a combined basis, GM, Ford and Chrysler have cut more than 100,000 factory jobs since sales began to slow in 2006.

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.

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.

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, with $4 billion of that immediately, as well as a $6 billion credit line. Chrysler wants $7 billion immediately.

"This is about survival at this point in time. There's going to be, unfortunately, (job) losses," United Auto Workers President Ron Gettelfinger told lawmakers.

"We can't sugarcoat it, we can't stick our heads in the sand," said Gettelfinger, appearing before the House hearing with chief executives Rick Wagoner of GM, Alan Mulally of Ford and Bob Nardelli of Chrysler.

All four testified before the Senate Banking Committee on Thursday.

Shares of GM were down 2.7 percent at $4 in late morning trading, while Ford rose 3.4 percent to $2.75, both on the New York Stock Exchange. Chrysler is owned by private equity firm Cerberus Capital Management.

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