SCENARIOS: U.S. automakers' future uncertain as debate rages

DETROIT (Reuters) - A proposed government bailout of the struggling U.S. auto industry faced uncertainty on Thursday as a U.S. House-approved $14 billion plan ran into stiff opposition from Republican lawmakers in the Senate.

Still, the possibility of support for U.S.-based automakers remained open under an alternate proposal from freshman Republican Sen. Bob Corker that would apply tougher standards for automakers that may be more palatable to his colleagues.

The House approved a $14-billion bailout plan on Wednesday night, but the bill appeared to be falling short of the 60 votes needed to overcome procedural obstacles in the Senate.

Corker said on Thursday he would propose giving loans to General Motors Corp and Chrysler provided the automakers cut their debt by two-thirds by mid-March, or else they must file for bankruptcy.

Some Republicans who have opposed the Democrat-led House bailout proposal have expressed support for the Corker alternative. But the House would have to come back and vote again if a Corker-based bill was approved by the Senate.

The House and Senate must pass an identical measure to send to President George W. Bush to be signed into law.

Here is what to expect as lawmakers work toward a vote on the proposed bailout:

IF CORKER PROPOSAL PASSES

Corker's proposal requires GM and Chrysler to cut debt by two-thirds, and convert half of their $20 billion obligations to the union-aligned VEBA retiree health care trust to equity.

The failure to meet the debt or VEBA schedule can force GM and Chrysler to file for bankruptcy, leaving the future of the two automakers still in doubt even if the bailout is adopted.

It may also be tough to clinch the required concessions from the United Auto Workers union or bondholders by the deadline.

IF DEMOCRAT PROPOSAL PASSES

Immediate loans would support the cash needs of GM and Chrysler through the first quarter, giving them room to work on restructuring plans to be submitted by the end of March. The loans would provide only limited breathing room and a bankruptcy filing would remain a possibility.

Those restructuring plans would have to show that creditors, investors and the union were all making financial concessions. However, automakers would not be forced to seek bankruptcy if they fail to agree on meaningful concessions from each stakeholder.

IF NO AID APPROVED THIS MONTH

GM would fall into the most immediate danger of the U.S.-based automakers if Congress fails to approve an aid package, followed by Chrysler and Ford Motor Co.

GM and Chrysler have said they could be forced into bankruptcy within weeks if they do not obtain federal funding and Ford has sought a line of credit as insurance against a worsening downturn or a failure of one of its rivals.

With cash dwindling, GM could try to buy time by asking for forbearance from its trade creditors who would be expected to demand expedited payment.

GM, which has already delayed two weeks of incentive payments to dealers into January, could also seek to delay other kinds of payments like salaries.

GM may also try to tap other sources of liquidity, potentially using unencumbered assets overseas to raise new secured lending overseas. But this would certainly be at punitive rates and new borrowing would complicate the swap of debt for equity fundamental to its restructuring.

A bankruptcy filing would be a last resort for GM, but would be an option, especially if the board of directors concludes that the automaker needs to make a break from Chief Executive Rick Wagoner's policies.

Still, the government likely would be forced to support GM through debtor-in-possession financing.

With more than half of GM's suppliers also tied to Chrysler and Ford, Chrysler could be quickly forced to follow GM into bankruptcy, which could trigger a liquidity crisis at Ford.

(Editing by Tim Dobbyn)