The White House on Friday unveiled a $17.4 billion rescue package for the troubled Detroit auto makers that avoids bankruptcy.

President George W. Bush said allowing the auto companies to fail would worsen the recession.

The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. The deal is contingent on the companies’ showing that they are financially viable by March.

The deal generally tracks key provisions of the bailout legislation that nearly passed Congress earlier this month. But it is somewhat more lenient in judging their viability.

The deal appeared to represent a relatively modest step in the administration’s efforts to put the auto makers on a long-term path to viability. By forsaking a trip to bankruptcy court, the White House gave up its most powerful weapon to extract concessions from the companies and their workers, suppliers, dealers and creditors.

But it likely will achieve what officials recognized as a more important – and perhaps conflicting – goal: preventing a collapse of one of the country’s most important industries, at a time of broad economic weakness.

In an appearance on Thursday, Mr. Bush appeared to allude to the conundrum: “I think under normal circumstances, no question the bankruptcy court is the best way to sort through credit and debt and restructuring,” he said. “These aren’t normal circumstances, that’s the problem.”

The administration was particularly worried about what it termed a “disorderly” collapse of the industry.

“We lost 533,000 jobs last month,” Mr. Bush said Thursday. “What would another million jobs lost do to the economy?  What would that do to the psychology in markets?  What would that do — how would that affect the working people?  And so as you can tell, we’re all in, in this administration.  And if need be, we’ll be in for more.”

(Source: Wall Street Journal)