WASHINGTON, DC (AP):

Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent Detroit's weakened auto industry from collapsing.

The White House said yesterday it was in "constructive discussions" with lawmakers in both parties to dole out the assistance as congressional leaders laid the groundwork for bailout votes next week.

A breakthrough on the long-stalled rescue came when House Speaker Nancy Pelosi yielded to President George W. Bush on a key point: allowing the aid to be drawn from a fund set aside for the production of environmentally friendlier cars.

Long-term viability

White House press secretary Dana Perino said that was central to any agreement, along with requirements that the carmakers swallow tough business decisions and taxpayers be protected.

"Taxpayers should not be asked to finance assistance for automakers without a strong likelihood that they will be paid back," Perino said in a statement before Bush left Washington to attend the Army-Navy college football game in Philadelphia.

Pelosi said the House would consider legislation in the upcoming week to provide "short-term and limited assistance" to the United States (US) auto industry while it undergoes "major restructuring."

"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness" of the industry, she said in a statement Friday. The Senate is also scheduled to be in session next week.

Lawmakers

The legislation being developed this weekend would act as a lifeline to General Motors Corp, Ford Motor Co and Chrysler LLC while meeting demands from many skeptical lawmakers that Congress refrain from writing a blank cheque for the beleaguered industry.

Pelosi, a close ally of environmentalists, had steadfastly refused to tap an existing US$25-billion auto-loan programme - meant to finance the production of more fuel-efficient vehicles - for emergency aid to the carmakers. But Bush refused to use money from the US$700-billion Wall Street bailout to help Detroit's automakers. With time running out on the current Congress and the automakers' situation increasingly dire, the window for an agreement was quickly closing.

She spoke to White House chief of staff Josh Bolten on Friday to signal her change in position, several officials in both parties said.

Pelosi said the billions of dollars set aside to modernise plants and develop green cars would be repaid "within a matter of weeks." Democrats said her hope was to include the funds in an economic recovery bill that lawmakers are expected to prepare for President-elect Barack Obama shortly after he takes office January 20.

Officials in both parties said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used by automakers for their intended purpose. The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.

One senior Democratic aide said Pelosi wanted to bar the automakers from using any of the funds to pursue a legal challenge to states seeking to put in place tougher auto-emission standards. The aide spoke on condition of anonymity because the legislation was not yet drafted.

The discussions came hours after the government reported that employers slashed 533,000 jobs in November, the worst single month's job loss in 34 years. Bush warned that at least one of the automakers might become a casualty of the severe economic crisis.

Market conditions deteriorate

Top executives from the Detroit automakers spent two consecutive days on Capitol Hill pleading for US$34 billion in loans to help the industry survive. GM and Chrysler said they needed a combined US$15 billion to help them maintain their operations through early 2009. Ford wants access to a line of credit of up to US$9 billion but only if market conditions deteriorate.

Detroit's automakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If just one of the automakers should declare bankruptcy, some estimates put US job losses next year as high as 2.5 million.

Meanwhile, President-elect Barack Obama said yesterday that he has asked his economic team for a recovery plan that saves or creates more than two million jobs, makes public buildings more energy-efficient and invests in the country's roads and schools.

National infrastructure

"We won't just throw money at the problem," Obama said in the Democratic Party's weekly radio address. "We'll measure progress by the reforms we make and the results we achieve - by the jobs we create, by the energy we save, by whether America is more competitive in the world."

Obama's remarks come after the Labor Department announced Friday that employers cut 533,000 jobs in November, the most in 34 years.

Obama said his plan would put millions of people to work by "making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s".

He also wants to install energy-saving light bulbs and replace old heating systems in federal buildings to cut costs and create jobs.