THE long-term fate of the United States auto industry rests with Barack Obama now that President George W. Bush has given car companies US$17.4 billion in emergency rescue loans.

Simply letting the Big Three collapse was not an option amid a recession, housing slump and financial credit crunch, Bush said in announcing the short-term loans and demanding tough concessions from the auto makers and their employees.

'By giving the auto firms a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time,' the President said in his Saturday radio address. 'And we will give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination, and emerge stronger than before.'

On Saturday, Canada's Prime Minister announced emergency loans for the Canadian subsidiaries of US auto makers totaling C$4 billion (US$3.29 billion).

Prime Minister Stephen Harper said Canada's bailout plan, the equivalent of 20 percent of the US aid package, will help keep the plants afloat while the auto makers restructure their businesses to retain one of the country's most important economic sectors.

'The US 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,' Harper said in Toronto.

The Detroit companies pledged to rebuild their once-mighty industry, though they acknowledged it would be tough to fight their way back from the brink of bankruptcy. If the car makers fail to prove viability - a positive cash flow and ability to make good on the loans - by March 31, they will be required to repay the government loans.

That's something they would find all but impossible to do.

Bush said the loans will give auto makers three months to institute plans to restructure into viable companies 'which we believe they are capable of doing.' He said if restructuring cannot be done outside bankruptcy, the loans will provide time for companies to make the legal and financial preparations needed for an 'orderly' bankruptcy.

'This restructuring will require meaningful concessions from all involved in the auto industry - management, labor unions, creditors, bondholders, dealers and suppliers,' he said. 'If a company fails to come up with a viable plan by March 31, it will be required to repay its federal loans. Taken together, these conditions send a clear message to everyone involved in American auto makers: The time to make the hard decisions to become viable is now - or the only option will be bankruptcy.'

The auto workers union said the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out the industry using money from the US$700-billion rescue program for financial institutions.

Obama, who takes office on January 20, praised Bush's action but said the companies 'must not squander this chance to reform bad management practices and begin the long-term restructuring' that's absolutely necessary.

Obama will be free to reopen the arrangement from the government's side 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.

Some US$13.4 billion of the rescue money will be available this month and next - US$9.4 billion for General Motors Corp and US$4 billion for Chrysler LLC, which have said they could be facing bankruptcy soon without government help. GM is set to receive the remaining US$4 billion in loans after more money is released from the financial rescue account. Ford Motor Co says it doesn't need federal cash now.