WASHINGTON – President Bush today announced a plan to help struggling General Motors and Chrysler LLC avoid bankruptcy, offering the carmakers $17.4 billion in short-term financing.

Under the plan, roughly similar to the bailout package that failed in Congress last week, General Motors and Chrysler will have immediate access to $13.4 billion of the funds, drawn from the $700 billion Troubled Asset Relief Program (TARP). Another $4 billion would likely be available in February. 

Citing extraordinary times, Bush said he put aside his initial inclination to let the companies fail, “as punishment for their own bad business decisions.” But, he noted, the country is in the midst of a financial crisis and a recession and “allowing the U.S. auto industry to collapse is not a responsible action.”

The plan allows GM and Chrysler breathing room to avoid bankruptcy while restructuring their organizations. 

The long-awaited financial lifeline comes with strict conditions. The automakers must prove they are viable by March 31 or the money could be recalled for immediate repayment to the Treasury.

In his early Friday morning televised speech, the President said to work, the plan requires concessions from all parties — automakers, creditors, shareholders, the union, dealers, and suppliers. 

Under the plan, the automakers must to reach an agreement with the United Auto Workers union to bring wages and benefits in line with those of employees of foreign-based automakers working in the U.S.

Executive compensation and other perks would be limited. The manufacturers would have to provide warrants for non-voting stocks and allow government oversight that could veto any transaction over $100 million. The rescue plan also requires the OEMs to adhere to fuel-efficiency and emission standards. 

In a statement released short after the President’s announcement, Chrysler Chairman and CEO Bob Nardelli thanked 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 principal, leading to implementation this coming year. Chrysler is committed to meeting these requirements.” 

GM also released a statement of thanks, in addition noting, “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.” 

The statement further said the plan will allow GM to “accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors.” The company said it intends “to continue to be transparent as we execute our plan, and we will provide regular updates on our progress. We again thank the Administration for this important support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve.”