Deal reached on auto bailout

After weeks of wrangling, the federal government has decided to provide $17.4 billion in loans to beleagured US auto giants Chrysler and GM.

President George W. Bush, who announced the deal in a press conference this morning, said the move was necessary to prevent the companies from collapsing.

"My economic advisors believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry," Bush said.

The deal, which will be funded with a chunk of the $700 billion bailout passed this fall, comes with a few hitches. About $13 billion of the funds will be available this month, with the intention to keep the auto companies afloat temporarily, putting the onus on the companies to turn themselves around for the long term. If a collapse still looms after three months, the loans act as a buffer to ease the auto firms into Chapter 11 bankruptcy.

Bush said the loans "will give automakers three months to put in place plans to restructure into viable companies -- which we believe they are capable of doing." He added that "if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success -- and gives consumers confidence that they can continue to buy American cars."

Read Bush's full speech here.

President-elect Obama chimed in on the deal shortly after the announcement:

"Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers. With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together -- including labor, dealers, creditors and suppliers -- to make the hard choices necessary to achieve long-term viability. The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it."

Material from the Associated Press was used in this report.