President Bush announced a rescue plan for General Motors and Chrysler LLC Friday morning that will make $13.4 billion in federal loans available almost immediately.A senior administration official briefing reporters said he expects that GMand Chrysler LLC will be signing the loan papers to access the cash later Friday morning.

The money will come from the $700 billion fund set aside to bailout Wall Street firms and banks in October.

GM will get $9.4 billion from the first allocation of federal loan money, while Chrysler would get the other $4 billion.

The loans are for three years but the money will have to be repaid in full within 30 days if the firms do not show themselves to be viable by March 31. It is expected that the companies will have to negotiate new agreements with unions and creditors in order to do so.

“Government has a responsibility to safeguard the broader health and stability of our economy,” he 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.”

“In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action,” Bush added.

Conditions similar to auto bailout bill

The terms of the loan are similar to those set in the auto bailout legislation that was passed by the House last week but was shot down in the Senate. Executives at GM and Chrysler must agree to limits on their compensation and eliminate perks such as corporate jets. The companies also must issue warrants, which convert into non-voting stock, to the government.

The loans do not include the concept of a so-called “car czar” to oversee the automakers, although it does say that a designee of the President would determine if the automakers are making the changes necessary for them to be considered viable.

The Bush administration official said that Treasury Secretary Henry Paulson would fill that role in the remaining days of the current administration.

The loans call for the automakers to prove they are viable by March 31, even though they are not expected to be profitable by that date. They must submit the details of the plans by Feb. 17.

Source: CNNMoney