The U.S. auto industry has lost more than 400,000 jobs in the past year, and President Obama says the industry cannot be allowed to fail.
"We cannot, we must not, and we will not let our auto industry simply vanish. This industry is like no other," he said. "It is an emblem of the American spirit; a once and future symbol of America's success."
But he says while the biggest U.S. car company, General Motors, has made a good faith effort to restructure in recent months, it needs to do more.
"But the plan they have put forward is, in its current form, not strong enough. However, after broad consultations with a range of industry experts and financial advisors, I am confident that GM can rise again, providing that it undergoes a fundamental restructuring," said Mr. Obama.
"Rick Wagoner has worked for that company for 31 years, and he is a good man. He clearly is a sacrificial lamb," said Granholm.
Wagoner is the latest corporate chief executive officer forced out as part of a government bailout. The leaders of mortgage lenders Fannie Mae and Freddie Mac, which the government took over, and the CEO of the giant insurance company American International Group lost their jobs last year.
Next, Mr. Obama says his administration will give General Motors enough money to operate for 60 days, while it works with the company on a better business plan.
"Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets or are they still saddled with so much debt that they cannot make future investments? Above all, have they created a credible model for how not only to survive, but succeed in this competitive global market?" said President Obama.
Mr. Obama says America's third-largest automaker, Chrysler, is in deeper trouble.
"It is with deep reluctance, but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable," he said.
The president is giving Chrysler 30 days to reach an agreement it has been working on to merge with the Italian automaker Fiat. If it does, Mr. Obama says he will consider lending up to $6 billion to help make the plan work. If not, he says Chrysler will get no more government money.
Both GM and Chrysler received $17 billion in government help from the Bush administration, and they are asking for another $21 billion from Mr. Obama.
The president says both companies may need to go into bankruptcy to clear away old debt and restructure quickly.
Also, Mr. Obama is naming former deputy labor secretary Edward Montgomery to go to communities with large auto factories and work with people to minimize the damage from job losses in the industry.