WASHINGTON — U.S. Sen. Bob Corker, R-Tenn., after a hearing with auto industry executives, said any bailout should come with conditions attached that, if not met by March 2009, would require the Big Three to refund the aid and immediately declare Chapter 11 bankruptcy.

Sen. Corker, a member of the Senate Banking Committee that held the hearing, said he would prefer the automakers reorganize through bankruptcy now. But acknowledging their protests that bankruptcy would take too long, he proposed his alternative with the March 2009 deadline that includes significant concessions by labor.

“I do think the situation is truly dire,” Sen. Corker said, acknowledging that some of the Big Three could shut down by the end of the year without help. “There is no way I would risk a penny of taxpayer money unless they are willing to do the draconian things they need to do to be competitive.”

Sen. Corker’s bailout conditions include General Motors, Ford and Chrysler getting the United Auto Workers union to agree to reset wages comparable to those paid by foreign automakers with plants here, restructuring some of their employee benefit packages and repaying bondholders at 30 cents on the dollar.

The senator said the automakers pay their rank-and-file employees an average of $70 to $74 an hour, including benefits, while foreign automakers pay an average of $42 to $44 an hour.

Sen. Corker said his plan would have virtually the same effect as the companies declaring Chapter 11 bankruptcy but would allow them to reorganize under the government’s watchful eye.

GM CEO Rick Wagoner said Sen. Corker’s conditions seemed workable.

The executives of the Big Three automakers were in Washington to plead their case for a $34 billion emergency loan, up from their request two weeks ago for a $25 billion bailout. But they also agreed that an oversight government board could administer the terms of the bailout.

Ford CEO Alan Mulally testified that the impact to the economy if the Big Three were forced to declare bankruptcy could be up to $1 trillion.

Sen. Chris Dodd, D-Conn., chairman of the committee, said during the hearing that lawmakers are nearing a consensus that action needs to be taken, but not without clear pre-conditions. Congress may reconvene next week to consider a bailout package.

“All of us up here appreciate that inaction is not an option,” he said. “We’re also not about to write a check and just hand it over.”

Sen. Richard Shelby, R-Ala., ranking member of the committee, was among several committee members skeptical that the bailout would do much good.

The bailout funds would serve only to “prop up a failed business model for a few months,” he said.

Sen. Corker, asked how a Big Three bailout might be viewed by foreign automakers with significant presence in Tennessee, such as Nissan and Volkswagen, said a healthy auto industry ensures healthy suppliers for all automakers.

“I don’t think that any of the transplants are pulling for these companies to go bankrupt,” he said.

Jill Bratina, spokeswoman for Volkswagen of America, which is installing a new plant in Chattanooga, said the company is supportive of a bailout.

“The vitality of U.S. manufacturing and the auto industry are important to a stable economy and a vibrant supplier network,” she said in a statement. “Volkswagen supports the U.S. government taking further steps to support the industry and help consumers get back into auto showrooms, such as increased credit availability and efforts to spur consumer sales.”

Sen. Lamar Alexander, R-Tenn., has not indicated whether he would support a bailout, while Georgia’s senators do not appear supportive, saying a bailout would send the wrong message to other industries.

“I have countless small businesses in Georgia that are suffering,” Sen. Isakson said. “You can’t expose the taxpayer to an open piggy bank for any company facing hard times.”

Executives from the Big Three are scheduled to testify again today, this time before the House Financial Services Committee.