Democratic lawmakers were gearing up yesterday to force through legislation to allow American car manufacturers and car-parts makers access to the $700 billion (£465.6 billion) bank bailout fund, along with stringent conditions.

It is believed that while some Democrats, including Nancy Pelosi, the Speaker of the House, are sympathetic to the plight of General Motors, Ford and Chrysler and are keen to offer them federal aid, they want to scrap executive bonuses, ban dividends paid to shareholders and seek agreements to make more fuel-efficient cars.

Other Democrats want the right for Washington to veto specific business ventures planned by any automobile beneficiaries of federal assistance.

Lawmakers on Capitol Hill began debating yesterday whether Detroit's Big Three car companies and vehicle-parts makers should have the right to claim state aid and in what form it should take. The discussion promises to develop into a showdown between the outgoing Republican Administration, which is broadly against allowing the car companies to tap the existing bailout fund, and the incoming Democratic administration led by Barack Obama. the US President-elect.

The Democrats are keen to offer financial lifelines to the car companies, with conditions, in an attempt to protect three million jobs that the car industry provides across the country.

President Bush is trying to identify ways of accelerating the payment of a pre-approved $25 billion government loan earmarked for the three carmakers to help them to meet the cost of modifying new vehicles to make them more fuel-efficient.

The Democrats have a tough fight ahead of them. On Sunday, Richard Shelby, the senior Republican on the Senate Banking Committee, argued that the car companies should be left to file for bankruptcy protection in the courts and avoid using taxpayer money to bail out a bust industry.

Mr Shelby said: “Should we intervene to slow it down, knowing it's going to happen? I say no.”

The car companies have already approached the US Treasury, which controls the $700 billion bailout fund and decides who will benefit. Henry Paulson, the US Treasury Secretary, refused their request to be allowed to tap the rescue programme. He has consistently argued that the purpose of the fund has been to address the root causes of the credit crisis - bank lending - not to use taxpayer funds to bail out doomed businesses. Amid pressure from Mr Obama, Mr Paulson has argued that Congress should create its own car bailout fund and leave his federal pot alone.

However, time is running out for the car companies. Rick Wagoner, the chief executive of General Motors, admitted this month that his company had lost $2.5 billion in the third quarter of the year and that it was burning so much cash it could be bust by Christmas. Ford, which confessed to losing $2.75 billion over the same period, said that it had enough cash to survive until April.

Yesterday, General Motors said that it would sell back its 3 per cent stake in Suzuki for $232 million in an effort to raise capital.

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