Congressional Democrats and the White House buckled down yesterday to set terms for US automakers to receive up to $17 billion in bailout loans on the condition that companies prove they can compete and restructure, officials said.

White House spokeswoman Dana Perino told reporters the assistance would only be considered for companies "willing to make the difficult decisions across the scope of their businesses to be viable and competitive" and in cases where strong taxpayer protections could be guaranteed.

She added that discussions had been "constructive" between the White House and congressional leaders of both parties. The planned bailout is aimed to avert the potential collapse of one or more companies.

The Bush administration and congressional Democrats agreed late on Friday on the size of the planned rescue - $15 billion to $17 billion - and a source of funding - an Energy Department loan programme approved in September to help automakers make more fuel-efficient vehicles.

The funding issue had been the biggest stumbling block so far in the bailout debate that has emerged after the companies failed in a first attempt to secure government help in November.

The automakers came to Congress this week seeking $34 billion in aid with nearly half structured as immediate to near-term low interest loans and the rest in future credit.

General Motors Corp. and Chrysler LLC, have asked for emergency assistance to forestall possible failure. Chrysler chief executive Bob Nardelli told a congressional committee on Friday the company needs $4 billion to survive through March. His counterpart at GM, Rick Wagoner, said he needs $10 billion over the same time frame.

Ford Motor Co. wants a $9 billion line of credit that would only be tapped if its finances deteriorate more than expected in 2009. Chrysler is also seeking more cash for operations into 2009 and GM wants a credit line as well.

Lawmakers in the House of Representatives and Senate hope to present a proposal to both chambers for formal debate and votes next week.

"Nothing is decided until all is decided," a congressional aide said in describing what other industry and political insiders predict will be challenging discussions on how to structure a bailout.

Possible conditions centred on limiting executive compensation, imposing strict loan repayment terms, and protections for taxpayer investment that might include an equity stake in a restructured company, lawmakers have said.

House Speaker Nancy Pelosi, a California Democrat, said on Friday the Energy Department funds must be replenished within weeks of withdrawal.

It is also possible, lawmakers and aides have said, to extend a very limited amount of aid with some conditions now and lay the groundwork for the next Congress and the new Obama administration to tackle a broader package next year.

The White House, which got its way in the funding source battle, has also insisted along with congressional leaders that the distressed companies prove they can be commercially viable in an industry battered by the credit crisis and recession.

Lawmakers at hearings this week with Detroit chief executives floated possible bailout conditions, including some that would shrink the industry from three companies to two.

Some House and Senate Republicans have called for bankruptcy restructuring or bankruptcy like approaches that would force automakers to renegotiate labour, supplier and lender contracts without actually going to court.

Democrats like Senator Charles Schumer of New York and a member of the leadership, proposed a trustee - or a 'car czar' - to bring all parties together quickly to hammer out concessions, while others said Congress could enact a provision creating a federal board to oversee any restructuring.

In a letter to colleagues, Schumer said the 'car czar' could distribute aid once all the stakeholders - executives, workers, bondholders, and dealers - agree to givebacks for returning to long-term viability.

The breakthrough in the bailout stalemate was facilitated by data on Friday showing an unexpectedly sharp downturn in US unemployment in November, which lawmakers, aides and insiders said got everyone's attention.

Employers slashed more than 533,000 jobs last month, the highest monthly decline in 34 years.