Barack Obama has said GM will emerge from its Chapter 11 bankruptcy filing a stronger company.
However, he also warned that there will be more job losses and further plant closures at General Motors before the company returns to health.
The restructuring will drastically change GM, with 20,000 US workers expected to lose their jobs as the firm streamlines its operations.
"I know you've already seen more than your fair share of hard times," Obama said, referring to workers facing the loss of their job. "I want you to know that what you're doing is making a sacrifice for the next generation - a sacrifice you may not have chosen to make, but a sacrifice that you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things."
The US president said a further $60 billion ((£18.3 billion) would be pumped into the ailing car giant in return for the government taking a 60 per cent stake in the company.
However, he stressed that the US government has no interest in using its right as a shareholder to try and run the company.
"What I am not doing, what I have no interest in doing, is running GM," he said.
Obama was positive about the future and said the plan to rescue the firm was “full of promise”.
However the process would not be easy, he warned, predicting "a painful toll on many Americans".
He told reporters he did not want to simply give the company more debt or let it survive on taxpayer’s money.
The court protection would be used to create "Old GM", with all the "bad" assets like defunct car plants - and "New GM", which will own the "good" assets, such as viable factories and brands like Chevrolet and Cadillac, he added.
"I am absolutely confident that if well managed, a new GM will emerge that ... can out-compete automakers around the world and that can once again be an integral part of America's economic future," said the president.
It is expected that GM may be able to exit bankruptcy protection in between 60 and 90 days.
GM CEO Fritz Henderson said the new car maker will be leaner and more focused than before. Steps to relaunch the brand will be "extraordinarily difficult", he warned, including further plant closures, although warranties and service products would be honoured.
"To those of you who have never tried a GM vehicle, or who have tried one and given up on us, we look forward to the chance to win your business and earn back your trust," he added. "The GM that many of you knew, the GM that in fact had let too many of you down, is history."