President Bush has announced that his administration will provide US$13.4bn in short-term loans to GM and Chrysler. The money will come from the US$700bn Troubled Asset Relief Programme (TARP), originally intended to provide financial institutions with emergency liquidity.

The two carmakers will get US$13.4bn in short-term financing to cover immediate liquidity concerns, with another US$4bn to be provided later. The government set a deadline of 31 March for the firms to become viable, Bush said.

"The American people want the auto companies to succeed and so do I," he added.

However, he said that US carmakers must make hard decisions as the industry needs to be reformed. The restructuring would require "meaningful concessions from all involved in the auto industry."

Chrysler chairman and CEO Bob Nardelli was quick to thank Bush.

He said in a statement that he would like to thank the administration and treasury for their confidence in the company.

"A letter of intent was signed which outlines the specific requirements that must be achieved," said Nardelli.

"These requirements will require consideration from all constituents, requiring commitment first in principle, leading to implementation this coming year. Chrysler is committed to meeting these requirements."

Nardelli said the company would remain focused on its challenge and this initial injection of working capital would help bridge the liquidity crisis the industry is facing and assist in helping return Chrysler to profitability.

General Motors said: "We appreciate the president extending a financial bridge at this most critical time for the US auto industry and our nation's economy.  This action helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us.

"This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success.  It will lead to a leaner, stronger General Motors."

Ford said it welcomed the emergency funding for GM and Chrysler.

"Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government," president and CEO Alan Mulally said. "But all of us at Ford appreciate the prudent step the administration has taken to address the near-term liquidity issues of GM and Chrysler. The US auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardise millions of jobs and further damage the already weakened US economy."