Nov. 12 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC would get $25 billion in loans from the Treasury's financial-rescue plan under a proposal by House Financial Services Committee Chairman Barney Frank.

Legislation is needed to authorize the Treasury to use part of its $700 billion rescue fund for the auto industry, Frank said today. He said he plans to introduce the bill Nov. 18 and hold a hearing on it the following day.

``A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened,'' Frank, a Massachusetts Democrat, said in an interview on Bloomberg Television.

Passage of an industry bailout plan may keep GM from running out of operating cash by year's end, which it says may happen without U.S. help. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and said it needs at least $11 billion to pay its monthly bills.

``We're not asking the taxpayers to throw good money after bad,'' Frank said. There will be ``protections about getting it repaid,'' he said, adding that it was too early to discuss bill details. ``The consequences of not doing it will be worse.''

Job Losses

GM is the second-biggest provider of private health-care benefits and was the third-biggest advertiser in this year's first half. Job losses would total 2.5 million from an automaker failure in 2009, according to a Nov. 4 study by the Center for Automotive Research in Ann Arbor, Michigan.

President George W. Bush hasn't said he would approve any further aid to auto companies. Frank said in the interview he believes Bush will sign the legislation.

``Chairman Frank doesn't speak for the White House,'' spokesman Tony Fratto responded when asked about Frank's remark.

Frank's plan to move ahead with aid for automakers came as some lawmakers questioned whether the package was necessary or fair. ``This is what happens when you bail out one industry, five more get in line,'' said Senator Jim DeMint, a South Carolina Republican.

Representative Spencer Bachus of Alabama, the top Republican on Frank's committee, said a bailout could be unfair to competing car manufacturers and may only spur other industries to turn to lawmakers for financial assistance.

``Where does this stop?'' Bachus said. ``We started with financial services, we went from banks to insurance companies,'' he said. ``Does it end with manufacturing? What about retail?''

Endless Debate

In addition to passing through the Democratic-controlled House, any legislation must be approved by the Senate, where the minority Republicans can stall legislation through endless debate.

Democratic gains in both chambers from the Nov. 4 elections won't go into effect until the new Congress convenes on Jan. 6. President-elect Barack Obama takes office two weeks later.

In the Senate, Carl Levin, a Michigan Democrat, is also drafting legislation that would give automakers a $25 billion loan, said his spokeswoman, Tara Andringa.

Funds that Democrats want to advance are likely to be one step in what could be a continued effort to address the troubles in the auto industry after Obama takes office, said Jim Manley, a spokesman for Senate Democratic Leader Harry Reid of Nevada.

Senator Barbara Mikulski, a Maryland Democrat, said she will introduce legislation Nov. 17 that would make interest payments on loans, as well as sales or excise taxes, deductible for autos purchased the rest of this year.

A family would save $1,553 on a $25,000 car. ``Targeted, temporary and timely assistance to the auto industry makes sense,'' Mikulski said in a statement.

`Need a Solution'

Treasury Secretary Hank Paulson said at a news conference today that ``we need a solution'' for the auto industry ``but the solution has got to be one that leads to viability.''

House Speaker Nancy Pelosi said yesterday she wants ``immediate action'' to give automakers additional assistance as shares of GM yesterday hit their lowest level since 1943 and analysts say the company faces possible bankruptcy.

GM climbed 16 cents, or 5.5 percent, to $3.08 at 4:15 p.m. in New York Stock Exchange composite trading after yesterday's fall to a 65-year low. Ford rose 4 cents, or 2.2 percent, to $1.84.

Pelosi said any aid to the automakers would come with conditions, including restrictions on executive compensation, ``a prohibition on golden parachutes'' and ``rigorous independent oversight.'' Democratic lawmakers said today the aid should be contingent on the automakers restructuring the industry to be more competitive.

`Rat Hole'

``We should consider giving $25 billion to save the industry but under certain restrictions,'' Paul Kanjorski, a Pennsylvania Democrat and top member of the House Financial Services Committee, told reporters. ``We have to make sure that we're not just going to throw it down a rat hole, that we're going to have a competitive world industry coming out of it.''

Representative Stephen Lynch, a Massachusetts Democrat, said any aid has to ensure taxpayers will recoup that money at some point in the future, and that lawmakers should require the industry to build more fuel-efficient cars.

``There needs to be incentives like that to force them to change the way they do business,'' Lynch said.

Congress already passed a $25 billion loan package for the industry in September, which frees up money for GM, Ford and Chrysler to retool factories to make fuel-efficient vehicles. The U.S. Chamber of Commerce today released a letter to Congress members calling for an additional $25 billion in aid.

``We're assuming any legislation that moves next week will have limits on executive compensation, give the government and taxpayers an equity stake,'' said Alan Reuther, legislative director of the United Auto Workers union, in an interview. ``We're fully supportive of all of that.''

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net; John Hughes in Washington at Jhughes5@bloomberg.net.

Last Updated: November 12, 2008 17:59 EST