WASHINGTON - DEMOCRATIC leaders in the US Congress called on Saturday for funds contained in a US$700 billion (S$1.047 trillion) federal rescue plan for the financial sector to be diverted to the struggling auto industry.

In a joint letter from Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi made public on Saturday, they urged Treasury Secretary Henry Paulson to use his powers under the Emergency Economic Stabilisation Act (EESA) passed to combat the financial crisis.

The act authorised US$700 billion in funding and granted Mr Paulson broad powers to purchase financial instruments to restore financial market stability, US$250 billion of which has ben pledged to buy stakes in US banks.

'We are writing to request that you review the feasibility of invoking the authority Congress provided you under the Emergency Economic Stabilisation Act of 2008 (EESA) for the purpose of providing temporary assistance to the automobile industry during the current financial crisis,' the letter said.

It added: 'Were you to determine that the automobile industry is eligible for assistance under EESA, we would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximise the potential for the industry's recovery.'

The biggest US automaker General Motors warned on Friday that it would run out of cash in the first half of next year and fellow Detroit giants Ford and Chrysler are also in crisis.

'Friday's news of the automobile industry's record low sales figures only reaffirm the need for urgent action,' said the letter, sent after Mr Reid and Mrs Pelosi met with auto executives and trade unionists on Thursday.

Democratic president-elect Barack Obama also pledged on Friday to help the auto makers, saying they were the 'backbone' of US manufacturing. -- AFP