As contrite auto executives testified in the Senate on Thursday, cracks began to appear in the weeks-long impasse between the House and Senate over how to bail out an industry on the verge of collapse.

House Democratic leaders began signaling that they may be willing to back off somewhat from their demands that any financial rescue package for automakers be paid for from the existing $700 billion financial rescue package rather than from a $25 billion loan fund intended to help car manufacturers build more fuel-efficient vehicles.

Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) concluded his five-and-a-half-hour long hearing with auto executives by declaring that he believes he has the raw materials to build a compromise that can pass both chambers.

“I believe we’ve got the makings of putting something together. I’ve been around long enough to know when I sense when I can go to work,” Dodd said. “And my sense is that I’ve a got a working situation here and I’m going to try to get it done.”

Still, Dodd cautioned that a deal was far from being announced, saying, “I don’t want to raise expectations that this is going to be easy.”

But movement among House leaders could prove significant — given the Bush administration has said it prefers to use the fuel-efficiency loans as the vehicle for any auto rescue.

One senior House Democratic aide said Speaker Nancy Pelosi (D-Calif.) may be willing to entertain a bill that uses some — but not all — of the fuel-efficiency money to prevent automakers from declaring bankruptcy or going out of business.

But the aide cautioned that Pelosi would have to take the temperature of the Democratic Caucus early next week to know whether that is a viable compromise. House leaders also are still considering a separate appropriation for the automakers, the aide said.

One proposal that has been floated is to use the fuel-efficiency loans to help save the manufacturing side of the auto industry, while using funds from $700 billion financial rescue package to bail out the car companies’ financing arms.

Senate Democrats appeared to be leaning toward that compromise, but Dodd was noncommittal.

One senior Democratic staffer said Members are mulling over all the proposals offered during Thursday’s Senate Banking hearing, but that lawmakers are strongly considering tapping into the money initially appropriated to force the auto manufacturers to create fuel-efficient cars.

The fuel-efficiency loans are “definitely on the table. In order for anything to pass it has to include [that],” the aide said. The aide added that Dodd likely would have a blueprint of a bill this weekend for his colleagues to go over.

Senate Majority Leader Harry Reid (D-Nev.) indicated earlier in the week that he would offer a “shell” or empty bill that would eventually contain some sort of assistance for the car companies, suggesting the likelihood that votes would occur next week.

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