US lawmakers have begun talking to Wall Street financial experts to see if there are ways to speed Chapter 11 bankruptcy and recovery plans should this prove necessary to rescue struggling Detroit automakers.

They have been exploring how the government could help the companies prepare bankruptcy filings that would take them in – and out – of Chapter 11 bankruptcy protection quickly, with much of the financing and other restructuring measures worked out with creditors in advance, people familiar with the matter told the Wall Street Journal.

While Ford yesterday suggested it could survive through 2009 on its own, GM and Chrysler both requested loans from Congress this month, saying they would likely run out of cash in the first quarter of next year.

In its submission to lawmakers last night, ahead of congressional hearings starting tomorrow, Chrysler included a lengthy section outlining why a taxpayer-funded loan would be preferable to a “pre-packaged” bankruptcy.

It told the Senate Committee on Banking, Housing and Urban Affairs the requested $7bn working capital bridge loan from the government was the most cost-effective means of ensuring the automaker’s long-term viabilityand considerably less than the US$17 to $20bn (at least) of Debtor-In-Possession (DIP) financing that its management believes would be required to sustain Chrysler for just a year in chapter 11.

“Moreover, without access to adequate DIP financing, management believes that Chrysler would be forced to liquidate, which would have severe consequences to the overall US economy,” the company said.

It added that 29 manufacturing facilities and 22 parts depots would be permanently shut down immediately, 53,000 of 55,000 hourly and salaried employees terminated, and no payments would be made to over $7bn in outstanding auto parts and service supplier invoices, forcing thousands of vendors out of business.

Over 3,300 dealers would go out of business and over 140,000 of their employees at dealerships would lose their jobs, the automaker added.

Nonetheless, in the past several days, congressional representatives have met with bankers and bankruptcy experts to discuss the possibility of a ‘prearranged bankruptcy’ for either GM or Chrysler, the Wall Street Journal sources said.

Ideas included the government putting up as much as $40bn to fund bankruptcy reorganisations, they said.

While GM also does not see bankruptcy as a viable option, bankers and other financial experts have been telling lawmakers that bankruptcy is the best option for creating smaller but viable US car companies, the WSJ report said.

“I think GM is eminently re-organisable,” Durc Savini, managing director at Miller Buckfire & Co, told the paper. His New York investment banking firm advised on the Dana and Dura Automotive bankruptcies  and he told the WSJ he recently talked with staff members for three House of Representatives and Senate members to discuss a bankruptcy at one or all of the Detroit makers.

Savini reportedly said he told the staffers a bankruptcy could work, but would likely require government money and concessions from workers, vendors, management and debt holders.

GM President Fritz Henderson has said bankruptcy is not viable so the automaker is focused solely on securing government help. “There is not a Plan B,” he was quoted as saying at a press conference yesterday.

The WSJ, citing sources, said the United Auto Workers union had told worker representatives that GM could be forced into a Chapter 11 filing before Christmas if the company fails to get government funding in coming days.

The UAW itself said in a briefing paper published on its website that the failure of the Big Three could ultimately cost 3m jobs nationwide.

House speaker Nancy Pelosi, a California Democrat,  has said bankruptcy isn’t an option for the companies because reorganisation would take too long while senate majority leader Harry Reid, a Nevada Democrat, said if Democrats decided to proceed with a bailout, legislation could come as soon as Monday, according to the WSJ.

ABC News reported last night that lawmakers would, however, struggle to get enough votes to pass any bail-out measures. One commentator suggested that if outgoing president Bush and president-elect Obama were really serious about helping the auto industry, they would go to Capitol Hill and “start working the phones”.

Senator Arlen Specter, a Republican from Pennsylvania, said on Tuesday the automakers would have to work hard to persuade sceptical lawmakers that they deserve federal bailout funds to enable them to stay in business, according to Reuters.

Specter reportedly said Congress was not currently in favour of providing the $34bn in emergency the automakers had asked for.

“The mood of Congress candidly isn’t supportive,” Specter told Reuters after calling a meeting in Philadelphia with auto industry executives, labour representatives and dealers.

According to the report, the meeting included Chrysler sales chief James Press and financier Wilbur Ross, a bankruptcy expert who helped to restructure the US steel industry.

Specter was quoted as saying the industry had been “on notice” for years that it needed to produce more fuel-efficient vehicles to compete with overseas rivals, but had failed to heed those warnings.

“There’s a scepticism about their ability to formulate plans to survive,” he told the news agency.

Specter added it was unclear if GM, despite what it said in its submission yesterday, would actually close its doors if Congress declined to provide the funding.

“They are still going to have to produce a plan that is reasonably likely to succeed, and that’s a tall mountain to climb,” he said.

But if any one of the Big Three automakers shut down, the others could too, and the effects on the wider economy could be “cataclysmic,” Specter added.