Dec. 9 (Bloomberg) -- The U.S. government may end up holding stakes in General Motors Corp., Ford Motor Co. and Chrysler LLC if Congress and the White House reach agreement on a financial bailout for the automakers.

Under the proposed rescue, details of which are still being discussed, the Treasury would get warrants for stock equivalent to 20 percent of any government loans. With GM seeking as much as $10 billion and valued at $3 billion, the state may become the biggest shareholder. The legislation isn’t clear on what kind of holding the government would take, leaving it the option of preferred, common, voting or non-voting shares.

Democrats in Congress drafted the plan to aid automakers with $15 billion in loans. The legislation, which allows the president to appoint a so-called auto czar, needs 60 votes to overcome a Republican threat in the Senate to stall the measure in endless debate using a parliamentary maneuver called a filibuster.

House Speaker Nancy Pelosi today suggested former Federal Reserve Chairman Paul Volcker as a possible czar to oversee the bailout.

“Somebody like Paul Volcker, who has the bipartisan confidence, and public and private confidence,” Pelosi, a California Democrat, said on NBC today when asked who President George W. Bush should name.

Republican Doubts

Some Senate Republicans yesterday expressed doubts about the Democrats’ plan, to be voted on in a special session this week.

“I remain concerned about committing federal dollars for the Big Three without any clear strategy that the money will be put to good use and repaid,” said Senator Judd Gregg of New Hampshire, the top Republican on the Budget Committee.

Tennessee Republican Senator Bob Corker said the plan “appears to be weak and lacking the benchmarks we believe are necessary to put these companies on a viable, sustainable path.”

With President-elect Barack Obama’s Illinois Senate seat now unoccupied, the Democrats’ majority has narrowed to 50-49, including two independents. That means Democrats, even if they are unified, must attract 10 Republican votes to overcome filibusters. The newly elected Senate, with at least a 58-42 Democratic majority, won’t convene until early January.

House Vote

Some Republicans, including Senators George Voinovich of Ohio and Kit Bond of Missouri, have supported legislation to aid automakers. Voinovich and Bond last month proposed drawing on previously authorized funds meant to help GM, Ford and Chrysler retool their factories to make more energy-efficient cars. Last week Pelosi agreed, breaking an impasse with the White House.

GM and Chrysler have said they need at least $14 billion in combined aid to keep from running out of cash by early next year. Ford, which would be eligible to apply for the loans, said again yesterday it doesn’t expect to.

The House may vote as early as tomorrow on the measure, House Democratic leaders said. Details are yet to be worked out and White House officials didn’t agree with all parts of the legislation, saying the Democratic bill may not force companies to make the long-term decisions needed for profitability.

“Long-term financing must be conditioned on the principle that taxpayers should only assist automakers executing a credible plan for long-term viability,” White House spokeswoman Dana Perino said yesterday. “We’ll continue to work with members on both sides of the aisle to achieve legislation that protects the good-faith investment by taxpayers.”

Conditions on Aid

The Democrats’ 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. The Bush administration’s own plan calls for a “financial viability adviser” to be appointed within the Commerce Department, now run by Secretary Carlos Gutierrez.

GM in a statement urged “quick passage” of the bill, saying “millions of jobs, America’s manufacturing base and future competitiveness hang in the balance.”

Bruce Andrews, vice president of government affairs for Ford, said in an interview that “our plan as it stands right now is to not need any federal assistance.”

Ford closed at $3.38 yesterday, the highest since Oct. 6. GM’s close at $4.93 was the highest since Nov. 28.

‘Maximum Flexibility’

Some Senate Republican lawmakers said the proposal doesn’t force the industry to make the tough decisions required to turn the companies around.

“It basically allows one person with maximum flexibility to disperse” the aid, Alabama Republican Senator Jeff Sessions said in a Bloomberg Television interview. “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.”

Senator Richard Shelby, an Alabama Republican, said Dec. 7 on “Fox News Sunday” he supports a filibuster, a procedural tactic to stall legislation by allowing endless debate.

Under the legislation, the automakers would be prohibited from paying dividends while loans are in place. Another condition would limit pay and bonuses and stop the companies owning or leasing passenger aircraft as a condition of loans.

Lawmakers had ridiculed the automaker chief executives for arriving in Washington in private planes two weeks ago to ask for money to help their companies survive.

Abandon Suits

By March 31, the automakers must submit long-term restructuring plans. The legislation requires automakers, as a condition of any loan, to abandon their lawsuits against California, New Mexico, Rhode Island, and other states that have passed laws to limit greenhouse-gas emissions.

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.

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

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.

To contact the reporters on this story: John Hughes in Washington at Jhughes5@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net.

Last Updated: December 9, 2008 08:28 EST