U.S. offers $13.4 bln rescue loan to GM, Chrysler

WASHINGTON (AFP) — President George W. Bush Friday unveiled a 13.4 billion dollar rescue loan for struggling US automakers, but demanded tough reforms in return in a move aimed at staving off a new economic calamity.

"In the midst of a crisis and a recession allowing the US auto industry to collapse is not a responsible course of action," Bush said as he released the package after weeks of mulling about the future of one of the country's economic pillars.

General Motors and Chrysler , facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country, agreed to the terms and will get the loans starting December 29.

GM will get 9.4 billion dollars in two installments through mid-January and Chrysler up to four billion this month, officials said.

Ford said it would not be part of the loan program, which could include an additional four billion dollars from February for GM pending congressional action.

The funds will come from the Treasury's 700 billion dollar Troubled Asset Relief Program (TARP) approved in October to bail out struggling financial institutions.

The companies have to provide warrants for non-voting stock, accept limits on executive pay and perks and give priority to the government loans over other debts, to the extent permitted by law.

The automakers will have to take steps to demonstrate their viability by March 31 or the government could require the funds to be repaid.

"The automakers and unions must understand what is at stake and make hard decisions necessary to reform," Bush said.

He added that restructuring the industry would "require meaningful concessions from all involved in the auto industry."

Among the "targets" established by the loan would be a two-thirds reduction in debt by exchanging debt for equity, more flexible work rules and cuts in wages to make the companies competitive with foreign carmakers established on US soil.

(Read the full article: US offers 13.4 bln dlr lifeline to GM, Chrysler)