Struggling auto giants General Motors (GM) and Chrysler have 60 days and 30 days respectively to show they can be operated as going concerns.
The White House said it will provide extra assistance to the two businesses during that time, but added bankruptcy is an option if solutions cannot be found.
President Barack Obama said problems in the motor industry should be tackled head-on, adding: "We cannot, we must not, let our auto industry simply vanish."
GM will be given money to see it through 60 days as it comes up with a new business plan. GM's chairman and chief executive, Rick Wagoner, has already been forced to resign and Mr Obama said someone with a "new vision" is required.
Meanwhile, Chrysler has got one month to reach an agreement with car company Fiat. The US Government will loan as much as six billion dollars (£4.2 billion) if a merger happens.
© Press Association 2009