WASHINGTON (Reuters) - Senate Democrats took the first step toward bailing out the nation's crippled auto industry on Monday by proposing a $25 billion loan program, a plan that faces stiff political headwinds with millions of jobs potentially riding on the outcome.

With the year's congressional calendar down to a few days, lawmakers and the Bush administration sparred over the best way to extend help to General Motors Corp, Ford Motor Co and Chrysler LLC.

"We're surprised that Senate Democrats would propose a bailout that fails to require automakers to make the hard decisions needed to restructure and become viable," White House spokeswoman Dana Perino said.

The Senate bill would, however, impose conditions. The government would take warrants for shares in exchange for aid, which would come with limits on executive compensation and a prohibition on the payment of dividends.

Automakers would also have to submit plans on how they intend to remain competitive, pummeled by plunging sales, little access to credit and a weakening economy.

Executives from the three companies are expected to amplify their calls for help at congressional hearings beginning on Tuesday.

Carl Levin of Michigan, the plan's chief advocate in the Senate, said the proposal to amend the Treasury Department's existing $700 billion rescue plan for financial services firms is the most efficient way to help auto manufacturers.

House Democratic leaders, led by House Financial Services Committee Chairman Barney Frank, released a draft of almost identical legislation later on Monday.

But the White House and many Republicans favor amending another law -- one approved in September to extend automakers $25 billion in technology loans to retool factories and make more fuel efficient cars.