Updated from 9:25 a.m. EST
WASHINGTON -- The federal government will provide a total of $17.4 billion in financing to the troubled U.S. automakers, drawing from the $700 billion federal bailout approved by Congress in October, President Bush said Friday.
The Bush administration has been looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry as
teetered on the brink of collapse and readied further plant closings.
has said it doesn't currently need aid to fund operations.
"The time to make hard decisions is now, or the only other option will be bankruptcy," Bush said in a press briefing. "By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a difficult time."
A senior administration official, speaking on condition of anonymity before the president's speech, said $13.4 billion in short-term financing will be drawn from the $700 billion Wall Street rescue program, with another $4 billion to be added later.
Treasury Secretary Henry Paulson said on Thursday that it was too risky to simply let the automakers fail.
"When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers ... it would seem to be an imprudent risk to take," he said.
Bush said the federal money comes with strings attached. The auto companies are required to come up with viable plans to restructure by the end of March, or they must repay the loans. The plans must detail how the companies will put their bloated retirement plans on "sustainable footing" and how the companies can become more competitive with foreign automakers, particularly those with operations in the U.S., such as
Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.
If they fail to produce a plan by March 31, the automakers will be required to repay the loans.
Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.
The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars.
The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories -- many for the entire month of January -- to cut vehicle production.
"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers," he said.
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