WASHINGTON (Bloomberg) - General Motors Corp. (GM) and Chrysler LLC, steadied by a $13.4 billion federal lifeline, face a March 31 deadline to slash debt, rework labour contracts and plan for thousands of job cuts or face government-ordered bankruptcy.

The loans announced yesterday by President George W Bush will provide the government with warrants allowing it to profit from a successful rescue, and seniority over much of the automakers' debt should the effort fail.

The Canadian units of both automakers will get C$4 billion ($3.3 billion) in government loans from Canada and the province of Ontario and may get more, Prime Minister Stephen Harper said yesterday.

"I cannot rule it out," the Prime Minister told reporters at a briefing today in Toronto when asked whether he may offer the automakers additional aid. "We have a social responsibility that goes beyond the marketplace."

Bush's move, which gives the US wide latitude over the auto industry for the first time since the 1980s Chrysler Corp. bailout, is aimed at keeping GM and Chrysler alive long enough for a reorganisation plan from the incoming Congress and President-elect Barack Obama.

Bush tapped the US bank-bailout fund to pay for the loans. GM is in line for $4 billion more in borrowing in February, provided Congress expands the Troubled Asset Relief Programme (TARP).

With both companies saying they were only weeks away from insolvency without an infusion of cash, the White House stepped in after a compromise plan backed by Bush and House Democrats stalled in the Senate, raising the prospect of a collapse that would have weakened a US economy already in recession.

Obama endorsed the plan, calling it a "necessary step" to "save this critical industry".

GM, the biggest US automaker, and No.3 Chrysler must comply with the government terms or have the Treasury Department call the loans. Such a step would likely force the companies into bankruptcy.

"Our focus now turns to rapidly and fully implementing our restructuring plan," GM CEO Rick Wagoner said at a news conference in Detroit, the automaker's hometown.

Ford Motor Co., the second-largest US automaker, has said it does not need emergency aid.

GM and Auburn Hills, Michigan-based Chrysler must provide warrants for non-voting stock, limit executive pay, open up financial records, not issue dividends until the debt is repaid and give the government veto power over transactions larger than $100 million. They also have to agree not to use corporate jets.

Government debt will become senior to other borrowing, to the extent allowed by law, and the automakers must cut their debt by two-thirds in an equity exchange.