Democratic congressional leaders said on Friday they were ready to provide a rescue plan for American automakers, and that they expected to vote on the legislation in a special session next week.

Seeking to end a week-long stalemate between the Bush administration and House Speaker Nancy Pelosi, senior aides said that the money would most likely come from $25 billion in federally subsidised loans intended for developing advanced fuel-efficient cars.

By breaking that impasse, the lawmakers could also clear the way for Treasury Secretary Henry M Paulson Jr to request the remaining $350 billion of the financial industry bailout fund.

Democrats are hoping Paulson will use some of that money to help individual homeowners avoid foreclosure.

Senior congressional aides said that it would include billions of dollars in short-term loans to keep the automakers afloat at least until Obama takes office. The auto companies will have to submit to strict Government oversight to make sure that the bailout funds are used to carry out the reorganisation plans they delivered to Congress this week. The auto company chiefs testified this week that they were willing to accept the regulation.

Pelosi had resisted using money from the fuel-efficiency program, which was approved as part of an energy bill last year. On Friday, Pelosi said that she would allow that money to be used provided "there is a guarantee that those funds will be replenished in a matter of weeks".

Word of a breakthrough came as Congress wrapped up two days of hearings at which lawmakers grilled the chief executives of the companies - Chrysler, Ford Motor Co and General Motors - and experts warned that GM could collapse by the end of this month.

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