Dec. 8 (Bloomberg) -- Congressional Democrats sent President George W. Bush a draft proposal for a $15 billion, short-term rescue of U.S. automakers and said it will likely be voted on this week.

The plan would require the president to appoint a person or board to oversee long-term restructuring of the auto industry as a condition for companies to receive federal aid. Final details are yet to be worked out and White House officials said they don’t agree with all parts of the legislation.

The plan would make General Motors Corp.,Ford Motor Co. and Chrysler LLC eligible for loans. GM and Chrysler have said they need at least $14 billion combined to keep operating through the end of March. Ford doesn’t plan to take any funding.

The House may vote Dec. 10 on the measure, Democratic leaders said. Automakers must take major steps to make themselves financially viable in order to remain eligible for funds, House Speaker Nancy Pelosi said.

“If they don’t meet the conditions of restructuring and the rest, there’s not going to be a continuous flow of money,” Pelosi, a California Democrat, said at a Capitol Hill news conference.

Studying the Plan

White House spokeswoman Dana Perino said administration officials are reviewing the legislation and continuing negotiations with Congress. “Long-term financing must be conditioned on the principle that taxpayers should only assist automakers executing a credible plan for long-term viability,” she said.

Some Republican lawmakers said the proposal doesn’t force the industry to make the tough decisions required to become profitable. “At first glance it appears to be weak and lacking the benchmarks we believe are necessary to put these companies on a viable, sustainable path,” said Tennessee Republican Senator Bob Corker.

Under the legislation, automakers would have to limit pay and bonuses and stop owning or leasing passenger aircraft as a condition of loans. Dividends wouldn’t be allowed while loans are in place, and taxpayers would get stock warrants equal to 20 percent of loans in order to recoup the federal funds.

The person appointed to oversee the program, a so-called car czar, would be allowed to make bridge loans to the three domestic automakers, which submitted plans to Congress last week. By March 31, the automakers must submit long-term restructuring plans under the legislative plan.

Total Collapse

House Financial Services Chairman Barney Frank predicted a measure would pass Congress and be signed into law this week.

“We don’t want to see a total collapse of any or all of the auto companies at the most vulnerable period of the American economy since the Great Depression,” Frank said in a Bloomberg Television interview.

The legislation also requires automakers, as a condition of any loan, to abandon lawsuits against California, New Mexico, Rhode Island, and other states that have passed limits on greenhouse-gas emissions from vehicles.

The seven-year loans would carry a 5 percent interest rate and the czar could compel early repayment if progress isn’t being made on restructuring plans. Shareholders, creditors, suppliers and dealers would work on the restructuring.

Alabama Republican Jeff Sessions said the car czar may be given too much power under the plan.

Bankruptcy

“It basically allows one person with maximum flexibility to disperse $25 billion,” Sessions said. “I am just firmly convinced that the best way to do this for GM and for these companies that are in crisis is to seek protection in bankruptcy.”

A statement from GM said the company could abide by the plan’s provisions.

“Millions of jobs, America’s manufacturing base and future competitiveness hang in the balance and we urge quick passage of this bill,” GM said in a statement. “We will abide by the conditions proposed in the bill and will continue our restructuring with great urgency.”

Bruce Andrews, vice president of government affairs for Ford, said in an interview that Ford doesn’t plan to use any federal loans.

“We have no near term need for liquidity assistance,” Andrews said. “What our hope is, and our plan as it stands right now, is to not need any federal assistance over time.”

Not Enough

Frank said that Bush has limited the amount of available money to loan and another $10 billion is needed to keep the companies operating until March. Bush should tap some of a financial-rescue package for that aid, Frank said.

While the legislation won’t require auto chiefs to quit, the Bush administration -- and in January President-elect Barack Obama -- would have authority to determine whether a restructuring of the companies requires management changes, Frank said.

Frank told reporters that the plan will have the votes to pass “as long as you have a board in power that can order them to restructure and make changes.”

Obama has supported steps by lawmakers to demand automakers meet conditions to get the aid. Regarding company executives, he said at a news conference yesterday that if management “doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”

GM rose 85 cents, or 21 percent, to $4.93 at 4:15 p.m. in New York Stock Exchange composite trading, while Ford climbed 66 cents, or 24 percent, to $3.38.

To contact the reporters on this story: John Hughes in Washington at Jhughes5@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net.

Last Updated: December 8, 2008 19:02 EST