Obama says automakers a high priority

WASHINGTON (Reuters) - President-elect Barack Obama said on Friday federal help for the distressed auto industry is a "high priority" of his transition, while the chief executive of General Motors Corp is confident of government intervention.

Separately, a senior Democratic leader in the U.S. House of Representatives said any decision to propose emergency bailout legislation to assist GM, Ford Motor Co and Chrysler LLC could be reason enough to call a special session of Congress later this month.

GM, Ford and Chrysler chief executives met Democratic congressional leaders on Thursday to discuss prospects of immediate help to counter plunging sales and steep losses the industry blames on the global credit meltdown. The industry is seeking a bailout of up to $50 billion.

Automakers and Democratic leaders have discussed a two-stage process in which government would provide $25 billion in direct loans to meet urgent needs, said industry and congressional officials with knowledge of talks.

A second $25 billion would come later and could be applied to a United Auto Workers (UAW) retiree health care trust, freeing up more cash for operations.

The stakes rose on Friday when GM said it had burned through $6.9 billion in cash in the third quarter and issued a warning on future liquidity. Ford ran through $7.7 billion but expects its cash burn rate to be slower this quarter.

Alan Mulally, Ford CEO, told analysts the company had sufficient liquidity and its business plan at the moment does not assume government assistance.

GM CEO Rick Wagoner said in an interview with Bloomberg Television that he was confident the government would come through with aid.

"I'm confident that when looked at under the, really, the clarity of the challenges being faced that we'll get the support that's necessary," Wagoner said.

To date, talk in Congress of holding a post-election "lame duck" session has revolved around the likelihood of passing a broad economic stimulus package. So far, there is no agreement among Democrats and Republicans to do that.

But House Majority Leader Steny Hoyer of Maryland told reporters that the urgency of auto industry troubles could justify a special session, although no decision has been made.

"The automobile industry is critical not only to our economy but to our national security. We need that manufacturing base, obviously 250,000 direct employees, but millions of indirect employees," Hoyer said.

Obama, at his first formal news conference since Tuesday's election victory, said the auto industry was "the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil."

He urged the Bush administration to do "everything it can" to accelerate disbursement of $25 billion in advanced technology loans approved by Congress in September.

Automakers were eligible on Thursday to begin applying for that assistance to help them retool factories and make more fuel efficient cars. But they do not believe the help alone is adequate for current needs or will be available soon enough.

"I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel efficient cars here in the United States," Obama said in Chicago.

Obama said his transition team, which includes Michigan Gov. Jennifer Granholm, will look at what can be done under current law or whether additional legislation would be necessary.

Democratic Rep. Sander Levin of Michigan said in an interview with Reuters that it was "essential" that government act this month to help automakers through their immediate crisis and not wait for Obama to take office in 2009.

"To wait until January would be a mistake," Levin said.

Help, Levin said, could come via legislation or through the ongoing corporate bailout programs administered by the Federal Reserve and Treasury Department in response to the global credit shock.

Levin said automakers would likely be subject to conditions similar to banks that have received billions in capital injections. Concessions by automakers in return for aid could include preferred stock, stock warrants and limits on executive compensation.

(Editing by Carol Bishopric)