The White House has come to the rescue of beleaguered General Motors and Chrysler by providing them with $17.4 billion in low-interest loans, ABC News has learned.
"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action," President Bush said today. "It could send our suffering economy into a deeper and longer recession. And it would leave the next president to confront the demise of a major American industry in his first days of office."
The money for the loans will come from the Troubled Asset Relief Program fund, signed into law this fall to bail out the financial industry.
The Treasury Department will provide $13.4 billion in short-term financing in December and January and plans to make another $4 billion available in February, provided Congress allows the White House to reach into the second half of the $700 billion TARP fund.
The White House has been talking to President-elect Barack Obama's team about its strategy, and the incoming Democratic administration has expressed no objections to the plan, sources told ABC News.
"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it," Obama said today in a statement.
President-elect Obama will take office on Jan. 20.
Read the White House Fact Sheet on the Loan Deal Here
Under the terms of the deal, GM will get $9.4 billion in December and January while Chrysler will get a $4 billion loan. GM will get another $4 billion in February, according to White House Deputy Chief of Staff Joel Kaplan. The Ford Motor Company is not included because it did not ask for a loan.
The loans come with strings attached, including limits on executive compensation and a ban on the use of corporate jets. The automakers will need to restructure, getting tough concessions from creditors, suppliers and the labor union.
The deal also includes non-binding "target" provisions, including making work rules and wages competitive with workers at foreign car companies in the U.S.
Treasury Secretary Henry Paulson will administer the plan until Jan. 20, at which point there will be another presidential designee to oversee the loans under the new administration.
If the companies cannot prove they are financially viable by March 31, the loans will be recalled and the money returned to the Treasury.
The White House is also calling for no dividends for stockholders until the money is paid back, and stipulating that the government can block transactions over $100 million.
Other non-binding targets of the plan include debt reductions by two-thirds as well as the elimination of jobs banks, a system that allows workers to get paid a large percentage of their wages even when they're not called in to work.
Today Chrysler CEO Bob Nardelli issued a statement saying the company was grateful for the helping hand and said, "Chrysler is committed to meeting these requirements."
GM likewise said the decision "will lead to a leaner, stronger General Motors," adding, "We appreciate the President extending a financial bridge at this most critical time for the U.S. auto industry and our nation's economy."
The United Auto Workers was already talking about altering the deal.