New York: Lawmakers at the US Senate began the first of two days of hearings into a plea by US automakers to be granted a financial lifeline with an intense grilling of auto firm executives. The session saw executives being castigated for short-sighted business strategies, and also recognition of the central position of the industry in the country's economy.

The US auto industry has been lobbying hard for a $25 billion loan from the $700 billion bailout fund created for the finance sector.

"Their board rooms in my view have been devoid of vision," said Sen. Christopher Dodd, D-Conn. "They have promoted and often driven the demand of inefficient, gas guzzling vehicles, and dismissed the threat of global warming." Dodd is chairman of the Senate Banking Committee.

One Republican lawmaker, Sen. Michael Enzi of Wyoming, said he was uncertain a bailout would work. "We have little evidence this $25 billion will do anything to promote long-term success," Enzi said.

On the other side of the room, the head of the United Auto Workers union, testifying side by side with the CEOs of the industry's Big Three, said the failure of one company would also impact confidence in the other two.

"If one of these companies goes into bankruptcy, I'd be willing to bet it takes two, or possibly all three, with them," said Ron Gettelfinger, president of the autoworkers' union, said during questioning.

According to industry experts, without federal help, General Motors will likely go bankrupt within months, with Ford and Chrysler next to follow. High labour costs and weak sales have already seen sales by domestic manufacturers now accounting for just 47 per cent of all cars sold in the country. A credit crunch, job losses and recessionary market trends are already bringing car purchases to a halt.

In his testimony General Motors boss, Rick Wagoner, pointed out the various transformational moves being made by his company. These range from developing nine hybrid models for next year to rapid development of the Chevy Volt, a car that runs on just electricity.

"We felt we were well on the road to turning around the North American business," said Wagoner. "Since then, the industry and the economy have been hit hard by the global financial crisis. It threatens the turnaround and GM's financial survival."

Chrysler chief executive Robert Nardelli said the industry is suffering a "critical lack of liquidity" because of the financial meltdown. He said Chrysler was burning through $1 billion a month in capital.

Trying to address the main criticism levelled at the industry, Ford's chief executive, Alan Mulally, said it was clear the industry needed to reorganize and that Ford had been doing just that. "Few companies have restructured more aggressively," he said.

Mullaly said that Ford had closed 17 plants and reduced its workforce by 51,000 workers. "As a result of all of our actions, we were profitable in the first quarter of this year and well on our way to sustainable profitability before the economic and credit crisis hit," he said.

Republican Sen. Richard Shelby of Alabama, grilled the CEOs about the outlook for the industry. "Why should we believe your firms are capable of restructuring now when you weren't able to do it under more benign conditions?" Shelby asked. "What would you do with the money if you were able to get $25 billion, and how would you pay this money back?"

GM's Wagoner stressed the company's current business model would work and that it would continue with the Volt program and use bailout funds to pay suppliers.

Ford's Mulally said his company has focused on building higher quality cars that get better gas mileage. "We'll come out the other side - we'll be a turbo machine," he claimed.

Chrysler's Nardelli claimed his company would soon build cars as fast as Toyota. "We will generate a profit," he said.

Even as some senators, including chairman Dodd, came down heavily on the auto industry others were more apprehensive of the ripple effects of an industry collapse.

"We can't afford to lose thousands of jobs," said Sen. Robert Casey, D-Pa. "What is a recession could become a depression if these companies fail in the next couple of months."

Supporters of an industry bailout say that a bankruptcy could wipe out nearly 2 million jobs, which are either directly or indirectly tied to the auto sector. They also claim that the government would suffer a loss in tax revenue of more than $100 billion over the next few years in case of an industry collapse.

It is the industry's argument that the cash bailout would allow it to hold out till the economy improves, new models begin to charm customers and savings from 2007 labour contracts begin to take effect.

Sceptics argue that the industry's problems are systemic, and a bailout merely delays the inevitable. It also encourages other mismanaged businesses to line up for dole.

As far as the Bush administration is concerned, rather than a bailout a modified $25 billion loan plan, originally sanctioned to allow carmakers to produce more fuel-efficient vehicles, will do the trick.

Automakers are apprehensive that this loan programme would come with too much conditionality.