The US government has agreed to provide $17.4bn in loans to Detroit’s struggling car manufacturers, President Bush has announced.
The money will come from the White House-controlled Troubled Asset Relief Program – a huge fund originally set up to prop up Wall Street banks.
General Motors and Chrysler will get an initial $13.4bn with a further $4bn arriving in February. This should keep both companies in business until March.
Allowing the US car industry to fail would not be "a responsible course of action”, said President Bush.
Under the terms of the Bush Administration’s new plan, the car makers must demonstrate financial viability by March otherwise the loans will be immediately recalled.
The White House has been forced to come to the rescue of the car makers after the US Senate threw out proposals to offer federal loans to Detroit’s Big Three with strict caveats attached.
Ford has backed away from taking the government’s money. It says it can continue operating, provided the economic circumstances do not worsen.