There's been a mixed reaction so far to President Bush's promise of $17.4 billion in loans to troubled U.S. automakers.
Congressional Republicans don't like the idea of using money from the $700 billion bailout program intended for banks and other financial firms, and the union representing autoworkers says this is too harsh on its members.
President-elect Barack Obama, praised the administration's action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."
Obama will be free to reopen the arrangement once he takes office, if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.
Obama was noncommittal on possible changes but said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."
Michigan Governor Jennifer Granholm, D., said the $17 billion loan package is "a great Christmas present, not just to the automakers but to those who supply them, representing 3 million jobs across the country.
"The reality is the auto industry touches almost every sector of the economy, whether it's steel or plastics or microchips or service industries, so this industry has to survive," she said this morning on CBS' The Early Show.
In announcing the loans on Friday, Mr. Bush said that a restructuring of the companies, in order to avoid bankruptcy and to ensure their future viability, would need to be drawn up by March 31. If they failed to do so, Mr. Bush said, they would have to repay the loans immediately.
"The time to make the hard decisions to become viable is now - or the only option will be bankruptcy," he said.
Meanwhile, Sen. Mitch McConnell, R-Ky., said he has strong objections to President Bush's plan.
McConnell, the Senate's top-ranking Republican, said Friday he objects to tapping into the financial rescue fund to help bail out a specific industry.
Now that Mr. Bush has freed up the money from TARP for General Motors and Chrysler, McConnell says all the stakeholders need to be held to strict, date-specific requirements in turning around the auto sector. He says those changes need to involve labor and health benefits, and should be agreed to by Feb. 17.
Republican Jim Bunning, the state's other senator, echoed McConnell's objections. Bunning said a news release that using the financial rescue fund for the auto industry is an abuse of power.
Under terms of the loans, Mr. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year. And he called for elimination of a "jobs bank" program - negotiated by the UAW and the companies - under which laid-off workers can receive about 95 percent of their pay and benefits for years. This month, the UAW agreed to suspend the program.
The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.
The government will also have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
UAW president Ron Gettelfinger has said he was disappointed that President Bush singled out workers when discussing concessions to be made, and that foreign auto companies would dictate the wages of UAW workers.
Granholm said the effort to restructure the automakers will require sacrifices on the part of all stakeholders, not just workers. "That is going to be a very, very tough slog, but necessary to have an auto industry in America that is vibrant.
But, Early Show anchor Erica Hill asked Granholm, can the Big Three survive without their employees making wage concessions?
"No, there has to be sacrifice on the part of everyone," Granholm said, but added, "People aren't aware that last year, the UAW entered into a very controversial contract going forward which cut in half the starting wages of those who would be employed at auto plants, from $28 an hour to $14 an hour. They offloaded all of their health care costs into a voluntary employee benefits association which was really revolutionary, too.
"They know they have to do more, but it's not just them, is the whole point. It has to be everybody who feeds into the system."
Canadian Prime Minister: We're "Doing Our Share" To Aid Big Three
Meanwhile, Washington isn't the only source of emergency funds for the ailing automotive industry.
Canada's federal government, and the government of Ontario, will provide the Canadian subsidiaries of the Detroit Three automakers with $3.29 billion in emergency loans, the prime minister said Saturday.
Prime Minister Stephen Harper said Canada's bailout plan - the equivalent of 20 percent of the U.S. aid package - will help keep the plants afloat while the automakers restructure their businesses to retain one the country's most important sectors.
"We cannot afford, in the United States or Canada, the catastrophic short-term collapse of the Big Three automakers. The U.S. has signaled that they are not going to allow these companies to fail, and we will do our share of the North American package to see that this doesn't happen either," said Harper speaking at a news conference in Toronto.
Canada's automotive industry represents 14 percent of the country's manufacturing output, 23 percent of manufactured exports, and directly employs more than 150,000 Canadians. The country's largest industry within the manufacturing sector, it has been suffering from its slowest sales in 26 years and dwindling operating cash.
Ontario has agree to provide 1.3 billion Canadian dollars ($1.07 billion) of the total since the province alone employs about 400,000 auto sector workers - both directly and indirectly - and the industry is the mainstay of about 12 Ontario communities.
"In Ontario, we've got thousands of people and their families who rely on the auto industry to be on firm ground, so they can put food on the table and keep a roof over their heads ... No state or province employs more workers, and we're not going to give that up," said Premier Dalton McGuinty, speaking alongside Harper Saturday.
The Canadian plan will provide General Motors Canada with loans of up to 3 billion Canadian dollars ($2.47 billion) and Chrysler Canada will receive up to 1 billion Canadian dollars ($823 million). The companies will get the money in three installments, with the first portion coming Dec. 29.
However, Harper and McGuinty stressed that the government will not be handing over blank checks, saying that all stakeholders will be expected to make adjustments to reduce structural costs.
"Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country," said Harper. "They expect all stakeholders to come to the table and work together towards sustainable long-tern solutions to maintain our current production share of the North American market."
Harper's statement was applauded by Canadian Auto Workers President Ken Lewenza, who said the union was willing to work with industry to protect jobs.
"This will ensure that the Canadian industry is protected and the numerous investments governments have made over the years will continue to benefit our communities. This is a very sound decision on the part of both governments," said Lewenza, who has been lobbying the government to develop an aid package as soon as possible.
Harper also announced two additional steps the federal government will take to support the overall competitiveness of the auto industry. Automotive suppliers will have greater access to accounts receivable insurance through Export Development Canada to compensate for the reduced availability of credit. A new facility will also be created to support access to credit for consumers to improve the accessibility of car loans and dealer financing.
Similar to the U.S. auto bailout package, the Canadian aid package comes with strings attached, including a request that parts suppliers get the money they are owed, that borrowers accept limits on executive compensation, and that they provide the government with warrants for nonvoting stock.
McGuinty warned that the money will only be delivered after auto companies agree to meet conditions set by the governments.
"Those conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and under way," said McGuinty.
Meanwhile, in the U.K., British auto manufacturers stepped up pressure on Prime Minister Gordon Brown's government to deliver an industry bailout package today as a report revealed that car production slumped by a third in November.
The Society of Motor Manufacturers and Traders warned that crumbling domestic and export demand would lead to extended plant closures and job cuts as production falls.
The industry body wants the government to move quickly to restore demand and loosen tight credit conditions.
The government has confirmed it is in talks with Jaguar Land Rover's Indian owner about possible financial support.
The society says the number of cars built in British factories dropped 33 per cent to 97,604 last month. Commercial vehicle production fell 50 per cent to just under 11,000.
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