White House reviews final Democrat auto bailout plan

By Thomas Ferraro and John Crawley

WASHINGTON (Reuters) - The White House and Democrats edged toward agreement on Monday to rescue U.S. automakers by extending emergency loans but their plan leaves key restructuring decisions to the incoming Obama administration.

Three days of talks between congressional Democrats and Bush administration officials neared conclusion with a draft bill, obtained by Reuters, outlining temporary low interest loans, terms for repayment and oversight submitted for final White House review.

The final figure was still being worked out with the plan worth between $14 billion and $17 billion.

The rescue aims to avert the threatened collapse of General Motors Corp and Chrysler LLC, saving thousands of factory and millions of related jobs in the U.S. recession.

"This is no blank check or blank hope," Senate Majority Leader Harry Reid said as he reconvened the chamber to consider a measure later in the week.

"If the companies fail to develop a plan that will lead to long-term competitiveness, profitability, if they fail to stick to that plan, the loan can be recalled," Reid said.

Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee, told CNBC television an agreement would come by day's end.

Senior Democratic and Republican aides believe the bailout will pass Congress.

Both GM and Chrysler have requested billions by month's end to boost their dwindling cash reserves. Ford Motor Co is requesting a line of credit that would not be tapped unless its finances deteriorate further than expected in 2009.

Wall Street responded positively with the Dow Jones industrials up more than 295 points partly on auto developments. Ford stock was up 25 percent to $3.39 just before the close, while GM was 20 percent higher to $4.90.

The plan would release loans later this month and establish a board headed, by a "car czar," to oversee the aid and compliance with terms.

The proposal also sets a March 31 deadline for the companies to submit detailed plans of how they intend to cut costs and further overhaul their businesses to compete with nimble and better capitalized rivals.

The plan initially lacked tough medicine some Republicans had sought, including specific requirements for bondholders and additional cost cuts from the United Auto Workers.

Nevertheless, GM seems headed for a wrenching restructuring that will hit investors, creditors, dealers and workers almost as hard as if the top U.S. automaker had sought bankruptcy.

The UAW union is seeking a stake in GM and a board seat as it offers new concessions. The union also said it will pose another round of buyouts in 2009. Union leadership wants rank-and-file to ratify new contract provisions for GM by the end of March.