WRAPUP 2-US auto bailout talks center on conditions for aid

* Democrats, W.House reach deal on auto bailout funding

* Sides focus on negotiating details of rescue terms

* Republican senator says plan so far not tough enough

By Thomas Ferraro and John Crawley

WASHINGTON, Dec 6 (Reuters) - Congress and the White House buckled down on Saturday to set terms for U.S. automakers to receive up to $17 billion in short-term bailout loans on the condition the companies prove they can compete.

White House spokeswoman Dana Perino told reporters the assistance would only be considered for companies "willing to to make the difficult decisions across the scope of their businesses to be viable and competitive" and in cases where strong taxpayer protections could be guaranteed.

Faced with plummeting sales they blame largely on the credit crunch and recession, General Motors Corp GM.N, Chrysler LLC CBS.UL and Ford Motor Co (F.N) sought $34 billion from Congress this week to forestall possible collapse.

Perino added that discussions had been "constructive" between the White House and leaders of both parties.

The Bush administration and congressional Democrats agreed late on Friday on the size of the planned rescue -- $15 billion to $17 billion in bridge loans to carry them into spring.

They also cleared the biggest stumbling block with an agreement that the funding would come from an Energy Department loan program approved in September to help automakers make more fuel-efficient vehicles.

The impetus for the bailout breakthrough was an unexpectedly sharp downturn in U.S. unemployment in November, which got lawmaker's attention out of fear thousands of U.S. auto industry workers could soon be added to the rolls. Employers slashed more than 533,000 jobs last month, the highest monthly decline in 34 years. ID:nN05431090

The Detroit Three have long been weighed down by overcapacity, high healthcare and retirement expenses for workers and high operating costs, as well as eroding market share due to competition from healthier foreign rivals like Toyota Motor Corp (7203.T).

Their slide accelerated in the second half of this year when record high gas prices undercut sales of bread-and-butter sport utility vehicles and pickups. Sales plummeted when the credit crunch exploded and recession worsened.

Chrysler chief executive Bob Nardelli told a congressional committee on Friday the company needs $4 billion to survive through March. His counterpart at GM, Rick Wagoner, said his company needs $10 billion over the same time frame.

Ford wants a $9 billion line of credit that would only be tapped if its finances deteriorate more than expected in 2009. Chrysler is also seeking more cash for operations into 2009 and GM wants a credit line as well.

Senior lawmakers hope next week to present a proposal for votes in both the House of Representatives and the Senate where there has been widespread skepticism about a bailout.