General Motors (GM) and Chrysler have been urged to make "tough decisions" relating to debt restructuring and fuel efficiency as they prepare to submit revamp plans to the White House, Reuters reports.

The two companies were granted a $17.4 billion bailout loan in December which has allowed them to stave off the threat of bankruptcy against a backdrop of falling demand and sales figures.

Now House Speaker Nancy Pelosi and Financial Services Committee Chairman Barney Frank have written joint letters to both, explaining that they must outline some major changes by tomorrow's (17th February) deadline.

According to Reuters, Ms Pelosi wrote: "We trust that your restructuring plan will demonstrate to the world that you are willing to make the tough decisions that modernise your operations, restructure your debt, enhance your competitive status in the global marketplace and protect American jobs for the future."

The letter also stated that the new strategies must incorporate debt restructuring which protects the taxpayer, shares sacrifices between stakeholders and demonstrates an ability to meet tough emissions laws in California.

GM is expected to put forward a two-pronged business plan, the Times reports, giving the government the option to hand over more cash to help it restructure or see it head into Chapter 11.

"We intend to deliver a detailed plan that restores GM to viability and meets the requirements of the US Treasury loan agreement," spokesman Greg Martin told Reuters.

However, other industry figures have suggested that both firms will put forward plans which are linked to improving the overall health of the country's auto industry.

A senior figure at Chrysler told Reuters that it will also present a two-tier proposal, one to cover it existing on its own and the other to include the possibility of alliances.

The company has already announced a non-binding agreement with Fiat to produce more small cars in the US and expand production to international markets as it battles falling consumer interest.

With that in mind, David Axelrod, President Barack Obama's Senior Advisor, has reaffirmed that a booming auto industry is vital for the US economy as it incorporates thousands of jobs.

In an interview with Fox News Sunday, he discussed the government's "vested interest" in seeing the sector recover through "significant restructuring" which will revolve around manufacturing small, fuel-efficient cars for the future.

Mr Axelrod also expressed his belief that the industry as a whole will only be revived if concessions are made by all parties involved in the restructuring of GM and Chrysler.

"That's going to involve concessions on the part of everyone, not just the auto workers, but shareholders, creditors and, of course, the executives who run the company," he told the news provider.

GM and Chrysler have both seen talks with the United Auto Workers suffer recently, with the former pulling out as a result of a dispute over retiree healthcare costs.

Sources:

White House urges concessions from all in auto talks (15/02/09)
http://www.reuters.com/article/ousivMolt/idUSTRE51E1XP20090215

Last hope for US car companies (15/02/09)
http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article5733748.ece

Democrats: US carmakers must make "tough decisions" (14/01/09)
http://uk.reuters.com/article/motoringAutoNews/idUKJOE51D03720090214?sp=true