The U.S. government extended credit to Detroit on December 19, in a deal that echoed some of the suggestions in my December 5 column. Here are statements by President Bush and Treasury Secretary Henry M. Paulson, as well as the GM and Chrysler term sheets. (Ford stated that it did not need the emergency assistance and was not included in the credit facility.)

The deal extends $17.4 billion in short term credit to GM ($13.4 billion) and Chrysler ($4 billion), at interest rates set at the greater of the three-month LIBOR (London Interbank Offered Rate, an interest rate benchmark) or 5 percent. A 3 percent (300 basis point) interest rate penalty becomes effective in the event of default. In exchange, the U.S. Treasury receives warrants (certificates entitling the holder to purchase stock) equivalent to 20 percent of the maximum loan amount to each company, up to a cap of 20 percent of its equity. (I suggested on December 5 that government loans be structured with equity participation for the taxpayers, and I'm glad to see that this provision made it into the program.)

The loans are good news for Detroit and for the one million U.S. auto industry-related jobs. The deal pulls GM and Chrysler back from the brink, but is hardly a kiss on the cheek — a balance that should please most, but not all (the deal was particularly tough on the unions, as described below). A federal signoff is required for any transaction not in the ordinary course of business with a value in excess of $100 million. Chrysler and GM must submit for approval by the U.S. government restructuring plans that will demonstrate their capability to repay the new debt, compete in the U.S. marketplace and rationalize costs, capitalization and capacity. Federally approved restructuring plans will remain in force through 2014.

The loan relief program comes with additional strings for GM and Chrysler. Executive pay is rolled back: Bonuses and incentives are suspended for the top 25 most highly compensated employees at each company, golden parachutes cannot be used, management incentives cannot add to company risk, and Chrysler and GM are obliged to recapture any compensation incentives paid on the basis of inaccurate information. And those corporate jets that infuriated Congress and the taxpayers in November must be put on the auction block.

The trickiest part of the auto relief package likely concerns labor policy. Under the new loan program, GM and Chrysler must make wages and benefits paid to their U.S. employees, many of whom are unionized, competitive with compensation to the American employees of Nissan, Toyota and Honda, who are not unionized. The same provision applies to employee work rules. Benefits to retirees must be paid partially in company stock, rather than in cash. As well, Chrysler and GM must eliminate the payment of compensation or benefits, other than severance pay, to U.S. employees who have been fired, laid-off, furloughed or idled, a provision that drives a stake through a key benefit of union contracts. Under the loan agreements, new contracts with the unions reflecting these provisions must be reached by March 31. United Autoworkers head Ron Gettelfinger hailed government financial support for Chrysler and GM and pledged to work with all stakeholders, but vowed to seek a change in terms from the incoming Obama administration.

There is good news for green in the Detroit loan agreements. The Chrysler and GM restructuring plans must demonstrate compliance with federal fuel efficiency and emissions requirements and launch domestic manufacturing of advanced technology vehicles. This makes energy efficiency and the rollout of green vehicles required elements of government financial support and smoothes the transition to a more sustainable economy.

Happily, the new relief for GM and Chrysler sets the stage for a green-friendly stimulus program in 2009. Disbursements under the program, once formally requested by the U.S. Treasury, will be deemed approved unless rejected by Congress within 15 days. Were I Hank Paulson, I'd get that request on record and hope that members of the House and Senate enjoy their holiday at home by the fire.

Leanne Tobias is founder and principal of Malachite LLC, an advisory firm that specializes in the development, leasing, management, financing and certification of sustainable or green real estate on a global basis. Write to Leanne about your thoughts on jumpstarting the economy at greenstimulus@malachitellc.com. She'll share the best ideas in future posts.