Clash over $25bn car firm bailout

Chrysler and its big US rivals say they need government aid

Democrats and Republicans have clashed over a $25bn (£17bn) bail-out plan for the biggest car firms in the US.

Ford, Chrysler and GM have all been hit by the slowdown, but aid proposals are falling victim to a fight over where the money should come from.

Democrats want the money to come from the $700bn rescue package for the US financial industry.

The White House and Republicans say the cash should come from money approved to develop more fuel-efficient vehicles.

Democratic majority leader, Harry Reid, criticised Treasury Secretary Henry Paulson for refusing to adapt the huge bank bail-out to help the car industry.

"All it would take is one stroke of a pen and that problem would be solved," he said.

However, the White House says the special rescue funds for the banks are not the answer, and has called on Congress to adapt an existing $25bn car-industry loan programme.

A White House spokesman insisted that the administration did "not want US automakers to fail".

Rescue plan

On Sunday, Rick Wagoner, GM's chief executive, said there was "a high degree of urgency" for government support if his firm were to avoid a financial crisis.

Last week, Bob Nardelli, the chief executive of Chrysler, said it would be "very difficult" for the company to survive without federal aid.

United Auto Workers president, Ron Gettelfinger, said the issue was not just about the three large US cars manufacturers.

"It's about thousands of small and medium-size businesses - employing millions of workers - that provide parts, logistics, research, engineering and other goods and services," he said.

Chrysler, Ford and GM have all been hit by falling US sales and growing losses

A two-day Senate hearing on the state of the US car industry will begin on Tuesday.

All three companies have rejected bankruptcy as an option.

GM, Chrysler and Ford employ about 250,000 people in the US, and claim that they support about four million other jobs.

However critics say that any rescue plan would be unfair, and make it harder for the big US car companies to introduce necessary changes.