Bush approves US car industry bailout

US president George Bush has approved a $17.4 billion (£11.6 billion) bailout of the country's automobile sector.

General Motors and Chrysler had previously approached Congress for emergency aid in order to stave off the two companies from going bankrupt. An earlier deal was rejected two weeks ago but the White House now says loan agreements have been signed with the two firms.

Speaking about the need for the two firms to be rescued, Mr Bush said: "Under ordinary economic circumstances, I would say this is the price that failed companies must pay.

"But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action."

The two companies will receive $13.4 billion (£8.9 billion) of the funds in a first instalment in early January. In exchange the companies will have to prove that they can restructure their business model by March 31st, 2009.

It also includes conditions on executive pay and a revised agreement between the firms and union workers. The funds for the bailout will be taken from the $700 billion bailout package announced by Congress earlier this year which was initially intended to be used to purchase troubled assets held by the banking sector.

US president-elect Barack Obama called the package a "necessary step" but urged both companies to use the opportunity to make hard decisions needed to reform themselves and become financially viable again.