The federal government has come to the aid of car companies Chrysler and General Motors to stave off their financial collapse during a particularly vulnerable economic time for the country. President George W. Bush announced a plan to aid them with $13.4 billion in federal loans Friday, December 19.

The move comes after weeks of debate among lawmakers and economists about the companies' loan request, made on the heels of an October decision to set aside $700 billion to financially bail out Wall Street firms and banks. Congress was unable to come together on an auto industry rescue bill before adjourning for the year last week, prompting the President to step in. Some lawmakers argued that the government's intervention in the auto industry would undermine the private enterprise system, and that the car companies were mismanaged, while others pointed to the number of jobs in many related industries that would be jeopardized by the failure of the car companies.

The companies must show "viability" by March 31, 2009, or pay back the loans immediately. The loans are good for three years. General Motors would get $9.4 billion of the initial funds, while Chrysler would get $4 billion. Ford Motor Company has announced it may be able to avoid dipping into the federal funds.

The money will come from the first $350 billion released in the $700 billion Wall Street bailout package. The companies could then borrow an additional total $4 billion once the remaining funds are released by Congress.

Allowing the U.S. auto industry to collapse would not be responsible, the President said in announcing the plan Friday.

"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," President Bush said. "Under ordinary economic circumstances, I would say this is the price that failed companies must pay - and I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances. 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."

Among binding terms of the loan, the firms must accept limits on executive pay and eliminate perks such as corporate jets. The debts owed to the government must take first priority. The companies must allow the government to examine their books and records, and the government has the power to block any transactions of more than $100 million. The companies have to issue warrants for non-voting stock to the federal government.

While Michigan lawmakers welcomed the plan, they pointed out that restructuring targets suggested by the federal government are still open for negotiation within the companies, and by their workers. The targets include reducing debt by two-thirds, eliminating the jobs bank that pays idle workers, and adopting work rules and wages competitive with those of transplant auto manufacturers by the end of next year.

Senator Carl Levin and Representative Sander Levin of Michigan issued a joint statement, pointing out the current crisis faced by the industry is also facing car makers around the world.

"The current crisis facing our domestic auto industry was brought on by factors beyond its control. Automakers around the world are facing similar challenges, and from Asia to Europe to Latin America, foreign governments have stepped up to keep their automakers from failing," their statement said.

The emergency loans will aid not only the companies themselves, but millions of working families in communities across America, they pointed out.

U.S. Senator Debbie Stabenow said the restructuring targets unfairly single out middle class workers.

"These provisions raise serious concerns regarding unfair, punitive conditions being placed on the backs of workers," she said. "The same workers that have already made historic concessions. It is very unfortunate that as part of the good news, of this important bridge loan, this proposal unfairly singles out workers.

"I look forward to working with President-elect Obama in the new year, and my colleagues in the Senate and House, to make this a better package that is fair to all parties involved, including middle-class workers."

Congressman Bart Stupak observed that reaching the targets will be appropriately left up to the companies and their workers.

"When the Senate failed last week to reach an agreement on short-term loans for the domestic automakers, it left a lot of uncertainty for dealers, suppliers, and the millions of workers in auto-related jobs across the country," Congressman Stupak said. "President Bush's announcement that the administration will tap into the Wall Street bailout funds to help the auto industry was welcome news....Although the White House plan includes targets for concessions by workers, I was pleased to see that the administration has appropriately left it to the auto companies, United Auto Workers, and other stakeholders to work out the details.

"Today's announcement is a significant step toward restoring our domestic auto industry and the American middle class, but much work remains," he continued. "The American auto manufacturers produce some of the best vehicles in the world. They have suffered disproportionately from the recession and this loan will allow them the opportunity to reorganize and retool. This is the first step on the road to longterm sustainability for our domestic auto industry."