The exchange interaction of polaronic carriers with localized spins leads t
o a ferromagnetic/paramagnetic transition in doped charge-transfer insulato
rs with strong electron-phonon coupling. The relative strength of the excha
nge and electron-phonon interactions determines whether the transition is f
irst or second order. A giant drop in the number of current carriers during
the transition, which is a consequence of local bound-pair (bipolaron) for
mation in the paramagnetic phase, is extremely sensitive to an external mag
netic field. Below the critical temperature of the transition, T-c, the bin
ding of the polarons into immobile pairs competes with the ferromagnetic ex
change between polarons and the localized spins on Mn ions, which tends to
align the polaron moments and, therefore, breaks up those pairs. The number
of carriers abruptly increases below T-c, leading to a sudden drop in resi
stivity. We show that the carrier-density collapse explains the colossal ma
gnetoresistance of doped manganites close to the transition. Below T-c tran
sport occurs by polaronic tunnelling, whereas at high temperatures the tran
sport is by hopping processes. The transition is accompanied by a spike in
the specific heat, as experimentally observed. The gap feature in tunnellin
g spectroscopy is related to the bipolaron binding energy, which depends on
the ion mass. This dependence explains the giant isotope effect of the mag
netization and resistivity upon substitution of O-18 for O-16. It is shown
also that the localization of polaronic carriers by disorder cannot explain
the observed huge sensitivity of the transport properties to the magnetic
field in doped manganites.