Bush hands car-makers a $17bn lifeline

George Bush handed a $17.4bn (£11.6bn) lifeline to the US car industry yesterday. The President justified the move to provide emergency loans to car-makers by saying that the US economy could not withstand the bankruptcy of General Motors, Ford or Chrysler.

Mr Bush 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. Under ordinary economic circumstances, I would say this is the price that failed companies must pay. But these are not ordinary circumstances."

Research suggests that the collapse of one major car firm could set off a chain reaction that will lead to three million job losses. GM and Chrysler are days away from running out of money, because the downturn across the world has led to a slump in sales of new vehicles.

The US government will use some of the $700bn fund originally pledged for the banking crisis. GM and Chrysler will get $13.4bn in loans now, with a further $4bn made available later.