Andrew Clark --The White House has reluctantly decided to prop up America's motor industry by providing $17.4bn of emergency funding to avert a potentially disastrous collapse of Detroit's leading car manufacturers.
Throwing aside his usual free market orthodoxy, President Bush used taxpayers' money to provide a three-month financial reprieve for General Motors and Chrysler in return for swingeing wage cuts among factory workers which provoked immediate anguish among unions.
In a speech from the White House's Roosevelt room, Bush said: "In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action."
From an initial fund of $13.4bn, GM will get $9.4bn and Chrysler will receive $4bn. The treasury will make a further $4bn available to GM in February. Detroit's third major firm, Ford, told the administration that it could get by without a handout.
Bush said without the money, manufacturers faced the prospect of disorderly bankruptcy and liquidation. Experts believe the loss of one of Detroit's "big three" would cause more than a million job losses among suppliers and contractors.
"Such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry," said Bush.
"It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession."
The decision ends a month of bitter political wrangling in which motor industry bosses shuttled between Detroit and Washington to plead for aid.
Congress failed to agree on a legislative rescue plan a week ago, leaving an executive order from the White House as the last hope.
The money will come from the US government's $700bn economic bail-out fund intended to support struggling banks. But the money comes with tight strings attached, which angered Detroit politicians and the UAW car workers' union.
Under the deal, GM and Chrysler must cut workers' wages and benefits to the level of counterparts at Japanese manufacturers by the end of next year, a timetable which employees view as unfair. In a direct challenge to Bush's authority, the UAW said it would appeal to president-elect Barack Obama to change the terms when he takes office next month. "While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," said the UAW president, Ron Gettelfinger.
His view was echoed by John Dingell, a congressman representing the car manufacturing city of Dearborn, who said: "It is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concession they have already made."
The White House's terms were put before carmakers late on Thursday and agreed in late-night discussions. They give the treasury significant involvement in day-to-day decisions at GM and Chrysler.
In return for the money, the firms must prove by the end of March that they are financially viable, with prospects for long-term profits.
They will have to sell their private jets, halt bonus payments to senior executives and seek government approval of transactions worth more than $100m. They must even tell the treasury of any deviations from expenses policy on minutiae such as travel, Christmas parties and conferences.
GM's chief executive, Rick Wagoner, said there had been little room for negotiation after a "stunning slowdown" in business.
"You wouldn't wish this kind of crisis on any industry, or company, or on our people," he said. "It's been very difficult."
The White House's intervention came on the day Chrysler shut its manufacturing operation of 30 factories for an extended Christmas break of a month, temporarily laying off 46,000 workers.
