Detroit Gets $17 Billion

The White House has given Detroit an early Christmas present. Friday, President Bush announced the Federal government will provide immediate financial assistance to General Motors and Chrysler, which warned that, without aid, they might go out of business by the end of the month.

"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," Bush said.

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Under the terms of the deal, the companies will receive $13.4 billion in emergency bridge loans. The money will be doled out from the $700 billion Troubled Asset Relief Program which the Treasury has at its disposal to alleviate the credit crunch. The companies will be eligible to receive an additional $4 billion in February. The bridge loans are expected to keep the companies afloat until at least March 31. If they have not been able to work out a viable plan for restructuring by that date, the administration will be able to recall the loans.

Without providing many specifics, Bush stressed that all parties involved--management, labor unions, creditors, bondholders, dealers and suppliers--will have to accept "meaningful concessions." Any money distributed from the TARP kitty includes restrictions on executive compensation and the ability for the government to take equity stakes in a company receiving assistance. Bush said bondholders will be forced to swap debt for equity and that workers will need to accept compensation "competitive" with foreign automakers operating in the United States.

In a statement, GM said the loans "will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success." Chrysler Chief Executive Robert Nardelli said that his company will receive $4 billion in immediate assistance, which will allow the company to "move forward with the restructuring and streamlining of our organization that we began in 2007."