Obama can change some auto loan rules: Treasury

WASHINGTON (Reuters) - The Obama administration will have some latitude in changing rules for up to $17.4 billion in government loans for Detroit automakers and can provide some leeway if the companies can't meet federal targets, a U.S. Treasury official said on Friday.

Term sheets provided to General Motors Corp and Chrysler provide explicit targets for viability, cost reduction and debt reduction. The Treasury official, speaking on a background conference call, said the companies can provide explanations if they can't meet the targets.

A presidential designee who will determine the firms' viability early next year will take such explanations into consideration, the official said.

"The incoming administration will have authorities to renegotiate certain commitments we've made if they so desire," the official said.

U.S. Treasury Secretary Henry Paulson consulted with the Obama transition team and with key members of Congress in crafting the loan plan, which effectively exhausts the initial $350 billion of a financial bailout fund. Many parts of the plan closely resembled a U.S. House of Representatives bill to provide loan funds to the automakers that stalled in the U.S. Senate, he said.

Paulson said earlier that Congress would need to release the second $350 billion in federal bailout funds, but the Treasury has not yet made a formal request, the official said.

To do so, the Treasury must issue a formal report to lawmakers explaining intended uses for the funds. Some members of Congress said they want this to include federal funds to mitigate home foreclosures, but the Treasury official declined to be specific about further uses of the funds.

Paulson is "spending a lot of time thinking about various approaches to housing and foreclosure issues," he added.

About $4 billion of the auto loans are contingent upon Congress releasing the second $350 billion, authorized in bailout legislation passed in October.

(Reporting by David Lawder; Editing by Jan Paschal)