On Monday morning, President Obama announced that the Treasury Department would back the warranties of new General Motors and Chrysler vehicles.

“If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always,” President Obama said during a speech from the White House. “Your warranty will be safe. In fact, it will be safer than it’s ever been, because starting today, the United States government will stand behind your warranty.”

The administration’s plan to stand behind new-car warranties for G.M. and Chrysler is intended to reassure consumers worried about buying domestic vehicles. And to a large extent, the plan should do exactly that. But people who already own a G.M. or Chrysler vehicle are not covered by this program and it also does not cover safety recalls, which can occur years after the warranty expires.

In a nutshell: The Obama warranty commitment program sets up special warranty accounts that will be used only if the automaker runs out of money. If that happens, the government will “appoint a program administrator who, together with the U.S. Government, will identify an auto service provider to supply warranty services.” Those accounts will be funded with 125 percent of the expected warranty cost. The automaker will contribute 15 percent and the government 110 percent. The federal funds will come from the Troubled Asset Relief Program.

That could be a lot of money (except, perhaps, by the government’s current standards). For example, G.M. paid $4.5 billion worldwide in 2007 on warranties and $3.9 billion during the first nine months of last year, according to a filing with the Securities and Exchange Commission.

Click here to read more.  For those interested in reading the President’s Warranty Program, here is a PDF file.