Updated: 11:16 a.m.
President George W. Bush on Friday announced a $13.4 billion bridge loan for automakers, saying the action was necessary to prevent a disorderly bankruptcy that could be too much for the tottering economy to bear.
Bush, who spoke at the White House, said the ailing automakers would have to repay the money if they could not provide major restructuring plans by March 31.
The deal will require the car companies to show that they can achieve profitability and a positive net worth, put their retirement plans on a sound footing and reduce workers compensation to a level competitive with foreign automakers, Bush said. At the very least, the funds will give the companies time to organize an orderly bankruptcy that would maintain consumer confidence, according to Bush.
The president appeared frustrated that Congress had failed earlier this month to approve legislation to aid the carmakers, saying inaction on Capitol Hill had forced the executive branch to intervene. He said he was taking the action in part so that President-elect Barack Obama does not have face the demise of the U.S. auto industry immediately upon taking office next month.
The funding will be taken from the $700 billion package Congress approved earlier this year to bail out the U.S. financial sector.
An additional $4 billion will become available to automakers after January if Congress approves the second portion of the $700 billion bailout fund for use by the president, according to administration officials.
The administrations move puts it at odds again with House Republicans, who rallied against the use of the funds from the $700 billion bailout to help keep the automakers out of bankruptcy.
Minority Leader John Boehner (R-Ohio) called the news disappointing and said by using taxpayer money, Washington has failed both autoworkers and taxpayers.
The use of TARP funds is also regrettable, the latest in a growing list of TARP money uses that were not discussed with or envisioned by Congress when the program was authorized, he said, Now that billions in taxpayer funds are being put at risk, it is more essential than ever that our Democratic counterparts back away from threats to impose extreme environmental mandates on the auto industry that will jeopardize millions of American jobs.
But not all Republicans agreed with Boehner.
Rep. Thaddeus McCotter (R-Mich.) said there was relief today in his district, which is located just outside the Detroit metropolitan area.
Its not as if we are jumping up and down, he said. There is a long road to hoe in a very short period of time.
McCotter said the funds would allow the automakers to avoid Chapter 11 bankruptcy and give the incoming Obama administration a structure to work with when it assumes power in January.
Jackie Kucinich contributed to this report.