Oct. 23 (Bloomberg) -- Michigan lawmakers urged Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to take steps to ``promote liquidity'' in the U.S. auto industry as lending dries up and vehicle sales plunge.

The lawmakers asked the Fed and Treasury chiefs in a letter today to aid through powers given by the Emergency Economic Stabilization Act. The measure, signed into law earlier this month, authorizes the Treasury to spend up to $700 billion to buy troubled assets and provide liquidity to credit markets.

``We need some relief here and we need it very quickly,'' Representative Joseph Knollenberg, a Michigan Republican, said on a conference call. ``We're asking for an `emergency situation' to be called so Americans can buy cars and trucks.''

Knollenberg said signs that the Treasury and Fed may be delaying actions to help the auto industry prompted the delegation to send the letter. During the conference call lawmakers requested the federal government to make money available to the whole industry, including automakers, auto suppliers, financers, and dealers.

``We're urging that the Fed use it's authority to make money available to the companies and lending finance operations,'' said Representative John Dingell, a Michigan Democrat.

Industry `Erosion'

``We should not tolerate this erosion of our industrial base,'' Dingell said on the call. ``This crisis that we have on credit did not begin in the auto industry, it began in the financial industry.''

In the letter, the lawmakers highlighted the importance to the U.S. economy of the auto industry, which they said employs 355,000 workers and provides health insurance to 2 million people.

Last month, Chrysler LLC talked with U.S. officials about whether the $700 billion government bailout would include automobile loans, President Jim Press said. Cerberus Capital Management LP owns Chrysler, credit unit Chrysler Financial and 51 percent of auto and home lender GMAC LLC.

GMAC has ``limited if any access to funding'' for its mortgage and auto-lending units, GMAC Chief Executive Officer Al de Molina said in an Oct. 14 e-mail to employees. GMAC also said last week it's restricting auto lending to buyers with credit scores of at least 700, who represent about 58 percent of U.S. consumers.

Market Conditions

Chrysler Financial said in August it raised $6 billion less than it was seeking in renewed funding, blaming the shortfall on credit-market conditions.

Treasury Assistant Secretary Kevin Fromer, in a letter to Knollenberg earlier this month, confirmed that the Emergency Economic Stabilization Act money could be used to buy car loans and mortgages held by auto-finance companies such as GMAC, Chrysler Financial and Ford Motor Credit.

General Motors Corp. said today it's cutting additional salaried jobs and suspending some employee benefits to try and conserve cash amid declining sales in the U.S. and Europe.

The world's largest automaker said in a letter to executives it would have to reduce salaried employment by more than the 5,000 jobs originally planned.

Chrysler, the third-largest U.S. automaker, said today it will shut a Delaware sport-utility vehicle plant a year ahead of schedule and drop a shift at a Jeep factory in Ohio because of the slowdown in industry sales. The move will eliminate about 1,825 jobs and take effect by Dec. 31, the Auburn Hills, Michigan-based automaker said in a statement.

To contact the reporters on this story: Alison Fitzgerald in Washington at Afitzgerald2bloomberg.net; Alex Ortolani in Southfield, Michigan, at aortolani1bloomberg.net;

Last Updated: October 23, 2008 13:57 EDT