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U.S. President George Bush says his administration will provide billions in short term loans to help the country's struggling auto sector, which he said is on the verge of a "disorderly bankruptcy."

At a press conference on Friday morning, Bush said the combination of a financial crisis and an economic downturn have created an "unprecedented" situation, which requires government intervention.

Media reports have said that Washington will give US$13.4 billion in short-term financing, which will be taken from the $700-billion Wall Street rescue program passed by Congress in the fall. Another $4 billion will be added later.

"Allowing the auto industry to collapse is not a responsible course of action," Bush said.

He said events have brought the Detroit Three close to bankruptcy faster than they had anticipated.

There's "too great a risk that bankruptcy now would lead to a disorderly bankruptcy," he said.

Bush said that would be an unacceptably "painful blow" for the economy and American workers. He said disorderly car company bankruptcies would:

• worsen a weak job market
• exacerbate the financial crisis
• lead to a longer recession

Bush noted that the companies will have to pay back the loans and present a course of action.

"Restructuring (the industry) will require meaningful adjustments," he said.

The companies will have to repay the loans, if they fail to come up with a plan by the end of March.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

According to The Associated Press, one Bush administration official said that:

• $9.4 billion will go to General Motors Corp.
• Chrysler LLC will get $4 billion.
• Ford has said it does not need immediate help.

Obama reacts to loan package

The auto sector's problems will eventually land on president-elect Barack Obama's desk when he takes office in January. Analysts have said he will likely be called on to give American car manufacturers a bigger bailout than the one announced Friday.

On Friday afternoon, Obama said he had not yet had a chance to examine the bailout plan offered by the White House and could not comment directly on it.

However, the president-elect did say whatever changes are made within the industry, must be made with an eye to the future.

"We're going to have to make sure that we've got a mechanism to force the kind of restructuring that is necessary so that we have a sustainable auto industry, an auto industry that is making the cars of the future, one that will provide security for the workers who are building these automobiles," Obama said.

He said his "top priority" as president is to produce 2.5 million new jobs for the American economy, some of which will be in the auto industry.

"My intention is to have my economic team work with, not only auto management, but also the UAW," Obama said.

The president-elect said he wanted to "talk to workers and find out what can we do in order to assure that their jobs are preserved, but not just for the next few months -- that they're preserved for years to come and that a next generation of autoworkers are going to be put in place."

The carmakers had warned they were in imminent danger of folding without government help. They've announced dozens of plant shutdowns across North America, some of which will extend into February and temporarily shutter some of the Big Three's Canadian operations.

Canadian reaction

Canadian Auto Workers president Ken Lewenza told reporters at a news conference in Windsor, Ont., that the loan package was a positive development, but he thought the autoworkers were being taken to task too much.

"The over-emphasis on workers' compensation has only succeeded in clouding the more pressing structural issue of unfair trade both in Canada and the U.S., which has eroded the domestic auto industry to its current state," he said.

Lewenza said the loan package would likely get the most troubled automakers -- Chrysler and General Motors -- through the first quarter of next year, but that long-term stability still needed to be achieved within the industry.

Spokespersons for both Prime Minister Stephen Harper and Ontario Economic Development Minister Michael Bryant said the package was "good news."

NDP industry and automotive critic Brian Masse told Â鶹ӰÊÓnet that his Windsor constituents are applauding the short-term loan deal which ultimately may help save their jobs and their pensions.

"We have many people here that...every day get up and produce very good vehicles and they work hard to do so in keeping their productivity up," he said in a phone interview from Windsor.

"We have many retirees who have a valuable pension that is tied to the automakers as well, too."

Automotive analyst Joseph D'Cruz, also a professor at the University of Toronto's Rotman School of Management, said the bailout was "a mark of desperation on the part of the outgoing Bush government."

He said the $17.4 billion package is not tough enough, because it gives the automakers money before they have developed plans to get themselves back to being financially solvent.

D'Cruz said the package from the Americans has left their Canadian counterparts in a difficult position.

"The Canadian governments have committed that they are going to give the car companies 20 per cent of what the Americans give," he told Â鶹ӰÊÓnet in a phone interview from Toronto.

"And therefore, they are on the hook now for $4 billion and they don't have a plan," he added.

"So they are now going to be having to make a decision about a $4 billion loan to the companies, without assurances, without maintaining our proportionate share of North American production, without any plan in hand."

With files from The Canadian Press