House speaker seeks auto bailout bill

WASHINGTON (Reuters) - House of Representatives Speaker Nancy Pelosi sought legislation on Tuesday to bail out failing automakers, saying she was confident an emergency measure would be approved next week.

Pelosi aims to amend the government's $700 billion corporate rescue law that now applies to banks and other financial services firms. No figure was given, but General Motors Corp, Ford Motor Co and Chrysler LLC are seeking $25 billion in urgent assistance.

"Congress and the Bush administration must take immediate action," the California Democrat said in a statement, to prevent what she called the potential "failure of one or more of the major American automobile manufacturers."

Senate Majority leader Harry Reid of Nevada said in a statement that Senate Democrats are "determined to pass legislation" to aid the auto industry but cautioned "it would only get done" with the help of Senate Republicans and the Bush administration.

GM, Ford and Chrysler are burning through cash and losing billions monthly. The companies blame the global credit crunch for an accelerated decline in U.S. sales and severe limits on corporate and consumer borrowing. Most consumers finance their vehicle purchases.

The three have argued to Congress their health is crucial to the U.S. economy since they employ 250,000 people and affect more than four million other jobs nationwide in related industries or indirectly.

GM said last week it could run out of cash by early next year. Ford is considered the healthiest of the three but virtually all of its assets are leveraged and it burned through $7.7 billion in cash last quarter.

Privately-held Chrysler does not report financial information but sources familiar with the company's strategy have said it is also churning through cash rapidly.

SHARES FALL

The government last month rebuffed GM's bid for capital to help facilitate a possible merger with Chrysler.

GM shares fell 13 percent to close at $2.92 on the New York Stock Exchange after earlier hitting a 65-year low of $2.76. Ford shares dropped 6.7 percent to close at $1.80.

Ford and GM said they were grateful for the call for swift action.

The White House has indicated it would weigh any help for Detroit but said Congress would have to take the first step and has urged a different course of action. The Bush administration has long been reluctant to endorse a bailout for carmakers.

"If Congress wants to change the (bailout) law, we'll see how they intend to do it," White House spokesman Tony Fratto said.

Pelosi and Reid had appealed over the weekend for Treasury Secretary Henry Paulson to act on his own to extend the corporate rescue program to automakers.

President-elect Barack Obama also supports help for the industry. Obama and President George W. Bush discussed the industry at their Oval Office meeting on Monday, aides said.

Although Pelosi expects a measure to pass, Congress will have a narrow opportunity next week to act. The Senate is expected to meet for three days while the House has no formal session planned. House members, however, are expected to attend leadership elections.

Chief executives of Ford, GM and Chrysler met with Pelosi and Reid last week to discuss a comprehensive aid package of $50 billion - with half directed as emergency capital. The second $25 billion, to be considered later, would go to a retiree health care trust fund to free up cash for other priorities.

The White House has urged Congress to accelerate the availability of $25 billion in advanced technology loans approved by lawmakers in September to help automakers make more fuel efficient cars.

Industry officials have said the centerpiece of that financing program would have to be gutted and the money made available now with few or no strings attached in order to help address their problems.

(Additional reporting by Tabassum Zakaria and Kevin Drawbaugh, editing by Vicki Allen)