Washington  - Democratic congressional leaders held out hope Thursday that a compromise on an emergency loan for the US car industry was still possible, after another day of haggling with more skeptical conservative lawmakers.

The House of Representatives approved a 14-billion-dollar emergency loan for the car industry Wednesday night, imposing strict oversight rules in exchange for keeping General Motors Corp and Chrysler LLC out of bankruptcy at least until April.

But Senate Republicans vowed to oppose the same deal in the upper legislative chamber, where Democrats hold a much slimmer majority than in the House. They argued the legislation still provides the loan without forcing tougher restructuring moves on the companies.

Senate Majority Leader Harry Reid, a Democrat, late Thursday said the two sides were working furiously towards a compromise. He offered few details of the bipartisan plan under discussion, but said if successful it would have "overwhelming" support in the chamber.

US president-elect Barack Obama at a Chicago press conference Thursday called on Congress to support the loan and prevent an industry failure that would be devastating for an economy already in recession.

"At this moment of great challenge for our economy, we cannot simply stand by and watch this industry collapse," said Obama, who has not taken an active role in the congressional negotiations.

Passage is more difficult in the closely-divided Senate. Democrats hold only a 50-49 majority, and 60 votes will likely be needed due to a procedural measure that can be used by opponents to block legislation.

A vote could come as early as Thursday night if a compromise could be reached. If there is no deal, Reid said he may force a take-it-or- leave-it vote on the Democrats' alternative Friday morning.

Mitch McConnell, the top Republican in the chamber, came out in opposition to the House legislation on Thursday, dealing a significant blow to the bail-out's chances.

"We simply cannot ask the American taxpayer to subsidize failure," McConnell said in a speech before the Senate, criticizing the legislature for being selective in its choice of which industries to rescue.

"A lot of Americans are asking where their bail-out is. They wonder why one business would get support over another," he said.

The bill would create a White House-appointed "car czar" who would oversee the companies' restructuring and have the authority to revoke the loan by March 31 if not enough progress was being made.

McConnell voiced support for an alternative proposal by Republican Senator Bob Corker. Among other things, Corker would force carmakers to immediately bring down labour costs to the level of Japanese competitors operating in the US. But Corker's is only one of a series of Republican approaches.

President George W Bush's administration backs the deal passed by the House, but the outgoing president has limited clout with his fellow-Republican legislators. White House press secretary Dana Perino said Bush telephoned key Republican Senate leaders throughout Thursday.

The carmakers have argued an emergency "bridge loan" is needed to weather the US recession, which has sent car sales to a 25-year low in the past two months.

But many lawmakers blame the industry's struggles on a failure to streamline production and cut costs over the past decade as foreign competitors gained ground in the US market. (dpa)