Bush announces auto loan program; Toyota loss looms

By Jeremy Pelofsky and John Crawley

WASHINGTON (Reuters) - President George W. Bush announced $17.4 billion in emergency loans to faltering U.S. carmakers on Friday in a dramatic step that would pull the industry from imminent collapse and save hundreds of thousands of jobs from falling victim to a deep recession.

Bush, seeking to bolster his legacy and bucking some fellow Republicans who would prefer to force the car industry to work out its problems without government aid, said it would be irresponsible in a time of economic crisis to let carmakers die.

The government will offer up to $17.4 billion in loans to the ailing U.S. automakers and expects General Motors and Chrysler LLC to access the money immediately, a senior administration official said.

"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," Bush said, warning that to do nothing would deepen and prolong the U.S. recession.

U.S. stocks rose in opening trading on Friday on the news of the government lifeline to the sector.

Some $13.4 billion of the total will be made available in December and January from a $700 billion Wall Street bailout fund that was originally designed to rescue struggling financial institutions.

The White House moved on its own after Democrats and Republicans in the U.S. Congress were unable to reach agreement after weeks of negotiations that included desperate pleas on Capitol Hill from the auto chiefs.

Bush attached some conditions. The loans would be called back if the automakers cannot prove they are viable by March 31, an administration official said.

The three-year loans would require limits on executive compensation. Auto companies must demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. The automakers would also have to provide warrants for non-voting stocks.

"This restructuring will require meaningful concessions from all involved in the auto industry -- management, labor unions, creditors, bondholders, dealers, and suppliers," Bush said.

Michigan Democratic Rep. John Dingell, whose state is the heartland of the U.S. auto industry, expressed concern about the prospect of concessions.

"We all want to see the Big 3 restructure and be competitive in the future, but it is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concessions they have already made," he said.

GM, CHRYSLER WOES

Bush announced the loan program just weeks before leaving office with low popularity ratings, an economy in recession and the country fighting two wars.

The collapse of the auto industry and its knock-on effect on the economy would have been another blow to his troubled legacy before he hands over to Democratic President-elect Barack Obama on January 20.