Congressional Democrats, encouraged by strong gains in both houses of the US Congress and the historic election victory of Barack Obama, are urging the Bush administration to provide aid to the struggling US auto industry.

After a meeting with industry leaders General Motors (GM), Ford, and Chrysler – the so-called "Big Three" – late last week, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi sent a letter to Treasury Secretary Henry Paulson urging him to make further aid available as quickly as possible.

"A healthy automobile industry is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's work force," the letter stated. "The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its work force."

Both Democratic leaders are now proposing that the administration adjust part of the $700 billion stabilization funds passed in early October to help shore up the auto industry. The Bush administration for its part has not responded to the proposal. Currently the funds are slated only for the financial services sector.

The Big Three have suffered under a rapidly deteriorating financial situation that has seen each consume vast amounts of cash reserves. The biggest of the 3, GM, has been hit the hardest and its current peril is providing a large part of the impetus for a bailout package.

Just last Friday the beleaguered auto maker reported that it will run out of operating capital by June 2009 if conditions do not improve or it does not receive financial assistance. By the end of September GM says its cash reserves had fallen over $5 billion from June's numbers to $16.2 billion. In order to maintain enough working capital GM said it needed a minimum of $11 - $14 billion.

Incoming White House Chief of Staff Rahm Emanuel, while not expressing specific support from President-elect Obama for the redirection of part of the $700 billion stabilization funds to the auto industry, echoed the call for aid to the industry. The President-elect previously stated in his Friday press conference that he has asked his economic advisors to re-examine the financial stabilization plan to see what if anything might be done to assist the auto industry.

Advocates of a bailout plan for the auto industry are proposing a 3 part plan. First they are asking for faster distribution of the previously approved $25 billion in low interest loans slated for development of more fuel-efficient cars; second, the plan calls for allowing the finance arms of the various auto makers to participate in the capital purchase program included in any bailout package; and third, the allocation of direct loans to the companies themselves, in exchange for preferred stock or warrants.