INSTANT VIEW: Auto sector secures emergency loans

NEW YORK (Reuters) - The government will offer up to $17.4 billion in emergency loans to the U.S. auto sector, providing some breathing room to General Motors Corp and Chrysler LLC as they try to shore up their cash position and restructure.

The U.S. government expects General Motors and Chrysler LLC to access the money immediately, a senior administration official said on Friday.

Some $13.4 billion will be made available in December and January from the $700 billion fund that was originally designed to rescue struggling financial institutions, but the loans would be called back if the automakers cannot prove they are viable by March 31, the official said.

The loans would require limits on executive compensation and other perks, and the automakers would also have to provide warrants for non-voting stocks.

U.S. Treasury's Henry Paulson said he expects the auto loans will prevent significant disruption to U.S. economy, and called an automaker plan for "significant restructuring" necessary for long-term viability.

General Motors said the government aid will help accelerate restructuring for the long-term, and help GM "preserve many jobs" and lead to "leaner, stronger" company.

MARKET REACTION

* Dow up 69.30 points, or 0.81 percent, at 8,674.29 after market open. GM and Ford both trade higher at the open

* S&P 500 up 8.02 points, or 0.91 percent, at 893.30 after market open

* Auto parts makers' stocks leap after U.S. extends lifeline to carmakers; Lear jumps 18 percent

COMMENTS:

ERICH MERKLE, ANALYST, CROWE HORWATH, MICHIGAN

"Thank God! From an economic perspective, we were looking down the barrel of a gun. So I am happy that someone has the good sense to duck.

"It's a lifeline, but it doesn't get them completely out of the woods. It takes them (GM and Chrysler) forward until March. Basically the next administration has to deal with it.

"You cannot let General Motors fail now. The macroeconomic consequences would be devastating, not just for GM and suppliers but for banks as well.

"A failure of GM would have sent unemployment much higher ...we would quickly move into double digits unemployment levels nationwide, we would see home foreclosures to spike."

TOM SOWANICK, CHIEF INVESTMENT OFFICER FOR $22 BILLION IN ASSETS AT CLEARBROOK FINANCIAL LLC IN PRINCETON, NEW JERSEY:

"Government loans are ahead of senior secured debt holders, which at best, is a bit of a slap in the face of the tax payer. Why should the government move to the front of the tax payer line when they are using tax payer funds to loan to auto makers?

"The $17 billion is coming from the TARP funds, which will be funded by deficit spending. By keeping interest rates at close to zero, the bond holder takes all the risks in funding the TARP and other programs. The government does not have governance as to how they will distribute to the tax payer or bond buyer any profit that may occur."

RAYMOND CICCOLO, A GM DEALER IN BOSTON

"This is wonderful. GM dealers, and Chrysler dealers, have been waiting for days and days to get receivables from the companies, such as delayed incentive payments. We're happy to get the money."

"GM avoiding bankruptcy is great, but I know they have until March 31 to become viable again, and I don't know whether cars would be selling. The question now is how to excite consumers to buy cars from January to March. We're all sitting on millions of dollars of unmoving cars."

RICHARD COOPER, EXECUTIVE DIRECTOR, CANADIAN OPERATIONS J.D. POWER & ASSOCIATES

"I think the issue is, how is it going to be used and what is going to come out the other end?"

"We don't know what GM or Chrysler have put on the table in terms of Canadian operations."

"For GM to remain viable, they are going to have to make a lot of changes. For Chrysler to remain viable, they are going to have to make a lot of changes and we don't know what those changes are going to look like and how they will impact the Canadian operations."

"What's the situation going to be six months from now? GM and Chrysler both have to have a plan that says here is where we're going and this is what the next year is going to look like."

SEN. GEORGE VOINOVICH, AN OHIO REPUBLICAN AND CO-CHAIRMAN OF THE U.S. SENATE AUTO CAUCUS:

"On behalf of all Ohioans, I am grateful the president stepped in to help thwart a disaster that would have sent our state over the cliff."

"The president has supplied oxygen to a patient fighting to get healthy through restructuring and becoming more competitive."

"While we are not out of the woods, there are millions of hard-working Americans today who can breathe easier this holiday season."

REP. TOM PRICE, A GEORGIA REPUBLICAN:

"It is deeply disappointing that the administration has chosen to use taxpayer dollars to delay the inevitable need to fundamentally restructure these companies."

"By bailing out automakers without real reform or long-term solutions, we are only protracting uncertainty and putting billions of tax dollars at grave risk."

ANDREA PUCHALSKY, DIRECTOR OF CORPORATE COMMUNICATIONS, LEAR CORP

"We went to Washington recently and visited our Congressmen to tell them how important this (bailout) was."

"It's fair to say that we are very pleased that they (the government) finally reached a decision."

SAL ARNUK, CO-MANAGER OF TRADING AT THEMIS TRADING IN CHATHAM, NEW JERSEY

"We are seeing a nice pop in GM and Ford but I would have thought we would have seen a greater pop.

"That makes me think that though in the pre-open we see a little bit of exuberance in the share prices, I would not be surprised to see them sell off in a sell the news type of event.

"For several weeks now, the government's indicated they're going to do anything possible to save the industry.

"Unless this aid package was substantially more than what was announced, I think it's pretty much built in."

JERRY WEBMAN, SENIOR INVESTMENT OFFICER, CHIEF ECONOMIST, OPPENHEIMER FUNDS, NEW YORK

"This is the government trying to put a floor under the economy."

"It's very explicit, this fact that they want the money back in March if they don't seem to be making any progress. How much progress they can make by March I can't imagine, and where they're going to get the money to pay them back is a little obscure also. But nevertheless the government is saying, 'This is a tourniquet, we're infusing blood in one are while it's bleeding out the other in an attempt to keep you alive.'"

CHARLIE SMITH, CHIEF INVESTMENT OFFICER OF FORT PITT CAPITAL GROUP, GREENTREE, PENNSYLVANIA:

"In the corporate bond market, to a certain extent the people that own the leveraged suppliers (to auto makers) are breathing a sigh of relief because it buys them time and bridges them to January 20th, when there will be a new set of rules."

FRANK LESH, FUTURES ANALYST AND BROKER, FUTUREPATH TRADING LLC, CHICAGO

"The markets want some kind of resolve on the auto deal and at least this gets us into next year. It really just buys them some time. We certainly didn't need any huge portion of unemployed into the market right now."

"I really think it just supports the market where you are. I don't expect a rally off of the news."

"It keeps the threat of bankruptcy into the first quarter of next year and possibly relieves that bankruptcy pressure but that's the part we don't know yet. There's still that uncertainty about the auto industry. This just gives them more time."

DENNIS VIRAG, PRESIDENT, AUTOMOTIVE CONSULTING GROUP

"These loans were desperately needed before the end of December because the situation for the automakers is so critical. It was just a matter of time before one of the Big Three filed for bankruptcy, and a number of auto suppliers are also at breaking point."

"Even with the loans we will still see bankruptcies within the auto suppliers' ranks, but it will prevent the catastrophic collapse of the automakers."

"It was widely expected that any loans would come with conditions and the conditions that the Bush administration has demanded sound very, very reasonable."

LINCOLN MERRIHEW, AUTOMOTIVE ANALYST, TNS AUTOMOTIVE

"I think the bottom line is that the government was going to have to write a check anyway. Either they give Chrysler or GM loans. If they didn't, they would have to financially support this controlled bankruptcy. And if it was an uncontrolled bankruptcy, then there would be a lot of people out of work.

"Because of the situation, they were going to have to write a big multi-billion-dollar check anyway. Giving GM and Chrysler loans was the best chance of getting any of the money back."

BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM BEDMINSTER, NEW JERSEY

"The (auto) bail-out should be a positive for stocks and risk appetite as it removes another major negative from the immediate outlook."

(Reporting by the U.S. Auto, Politics and Markets teams; compiled by Edward Tobin)