UPDATE 1-Ford seeks insurance should recession worsen:CEO

* Ford seeks government loans as insurance

* Ford in talks with UAW; focus on cost competitiveness

* US auto industry sales recovery seen taking longer

By David Bailey

DETROIT, Dec 2 (Reuters) - Ford Motor Co (F.N) has sufficient liquidity to weather current economic conditions, but has sought government aid for insurance against a worsening of the economy, Chief Executive Alan Mulally said on Tuesday.

"Clearly, we are in a recession and if this gets much worse, and the industry declines, and sales decline, than we are asking for a line of credit, so to speak, that we could tap to make it through this recession and continue the transformation of Ford," Mulally told Reuters in an interview.

Ford went to the market in late 2006 to borrow more than $23 billion, pledging substantially all of its assets, including the familiar blue oval logo.

The automaker seeks access to up to $9 billion in bridge financing from the government as a backstop should the economy worsen, and hopes to complete its restructuring without tapping the line of credit if possible.

Mulally, who spoke to Reuters via telephone while riding in a Ford Escape Hybrid headed toward Washington for Congressional testimony later this week, said the automaker highlighted more details on product development for the upcoming testimony.

He described the detailed plans as "shared sacrifice" that includes compensation cuts for Ford management and workers.

Ford has had discussions with the United Auto Workers to improve its competitiveness in North America, he said.

"A lot of what we can do on productivity is built into the basic contract, that allows us to continue to make productivity improvements through the life of the contract, but we have not decided with the UAW to technically open up the contract itself," Mulally said.

Mulally said the jobs bank, which allows idled workers to receive pay and benefits for up to two years, would be one element of competitiveness.

The jobs bank, management compensation and luxury travel arrangements were all points of criticism for U.S. automakers when automaker CEOs appeared before Congress in November. All three CEOs had flown in corporate jets last month.

"I am in an Escape hybrid right now," Mulally said, declining to say when he had left for the trip.

Ford said on Tuesday that Mulally had agreed to take a $1 annual salary if the company accepts government aid. The automaker also plans to sell its corporate jets.