The US Government has agreed to a $17.4bn (£11.6bn) bail-out loan for the troubled Detroit Three – General Motors, Chrysler and Ford. President George W Bush says the carmakers will get $13.4bn (£9bn) in short-term financing from the $700bn (£468bn) Wall Street financial services bail-out funds, and another $4bn (£2.7bn) will be provided later.
The three-year loans will be called back if the carmakers cannot prove they are viable by March 31, the US Government says. The conditions of the loan say that the three Detroit car manufacturers must have a positive net balance as soon as possible, and that continuing falls in revenue would be unacceptable.
“The American people want the auto companies to succeed and so do I,” says President Bush, adding that if the carmakers collapsed, the US economy would be sent into a deeper and longer recession.
GM and Chrysler will take up the loan offer immediately, but Ford executives say it will only take the funds if it needs to.
Both GM and Chrysler have warned that they could run out of money next year without a cash-injection.
In the UK, the Government is expected to unveil a limited aid package for car manufacturers before Christmas in a bid to prevent thousands of potential job losses. Prime Minister Gordon Brown pledged to help the car industry through the economic downturn. but says the main responsibility lies with the carmakers’ owners.