The US government confirmed on Friday (19th December) that it will issue loans to the tune of $17.4 billion in order to save General Motors (GM) and Chrysler from bankruptcy.

The troubled automakers - who have seen sales slump dramatically this year - were left reeling when a similar $14 billion proposed rescue plan was rejected in the Senate last week.

However, President George W Bush announced that he will bypass the need for Congressional approval by dipping into the existing $700 billion bailout for financial institutions.

Explaining the move - which will see GM and Chrysler receive $9.4 billion and $4 billion respectively by the end of the year and a further $4 billion in due course - Mr Bush said he felt it was a special case.

He said: "Under ordinary economic circumstances, I would say this is the price that failed companies must pay.

"But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action."

The announcement has been welcomed by the industry at large as there were growing fears that millions of jobs could have been lost if any of the 'Big Three' - GM, Chrysler and Ford - went to the wall.

Responding to the news, President-elect Barack Obama warned the automakers not to "squander this chance to reform bad management practices".

"The auto companies must bring all their stakeholders together, including labour, dealers, creditors and suppliers, to make the hard choices necessary to achieve long-term viability," he said.

Source:

Bush unveils $17.4bn car bail-out (19/12/08)
http://news.bbc.co.uk/1/hi/business/7791999.stm