Auto Makers Seek Bailout, But Prospects Appear Dim

US auto executives took their case for a $25 billion bailout to Congress on Tuesday, warning that the industry was on the brink of disaster. But prospects for a bailout this week appeared dim.

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Rick Wagoner, the head of General Motors , bluntly told the Senate Banking Committee why the executives were there.

"This is about much more than just Detroit," Wagoner said. "It's about saving the U.S. economy from a catastrophic collapse."

Earlier in the day, Ford Motor Chief Executive Alan Mulally warned of dire possible consequences for the auto industry if one of Detroit's Big Three carmakers had to file for bankruptcy.

Mulally said in an interview with CNBC that consumers would be less likely to buy a car from a bankrupt automaker, thus deepening the industry's problems.

Wagoner and Mulally testified before the Senate committee along with Robert Nardelli, head of Chrysler, and Ron Gettelfinger, head of the United Auto Workers union.

The hearings came a day after Senate Democrats proposed to bail out the ailing industry with $25 billion in government-backed loans.

But the new rescue plan appeared stalled on Capitol Hill, opposed by Republicans and the Bush administration who don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion.

"My sense is that nothing's going to happen this week," Sen. Bob Corker, R-Tenn., said at the opening of the hearing.

Earlier, Majority Leader Steny Hoyer said Congress might have to return in December—rather than adjourning for the year this week, as expected—to push through an auto bailout.

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"Dealing with the automobile crisis is a pressing need. We are talking about a lot of people...and a great consequence to our economy," said Hoyer, D-Md.

The financial situation for the automakers grows more precarious by the day.

Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.

In the Senate, Democrats discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September—designed to help the companies develop more fuel-efficient vehicles—to tide them over financially until President-elect Barack Obama takes office.

"There was no indication that there was any traction" for the White House plan, Sen. Ben Nelson of Nebraska said after a Democratic caucus luncheon.

But even the car companies' strongest supporters conceded that changing the terms of the fuel-efficiency loan program might be the only way to secure funding for them with Congress set to depart for the year and the firms in tough financial shape.

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"While I believe we have to have retooling going into next year, if in the short run the only way we have to be able to get some immediate help is to take a portion of that, I would very reluctantly do that—but only because I believe President-elect Obama is going to be focused on retooling and on a manufacturing strategy next year," said Sen. Debbie Stabenow, D-Mich.

—Reuters and AP contributed to this report.

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