Page last updated at 10:26 GMT, Thursday, 25 September 2008 11:26 UK

Car giants set to get $25bn loan

The newly unveiled 2010 Chevrolet Camaro
More efficient cars, like Chevrolet's new Camaro, will have to be made

US car giants may be on course to get a $25bn (13bn) government loan to help them build greener cars and ease them through tough economic times.

The House of Representatives voted to back a spending bill that includes a low-interest loan for the industry.

The US government has only bailed out a carmaker once before and that was with a much smaller amount of money.

The last government intervention was in 1980 when Chrysler was offered a loan of $1.2bn.

The Senate is expected to pass the broad spending bill this week.

The bill's sponsors hope that President George W Bush will sign it off by 1 October, when the government begins its new financial year.

Industry lobbyists wanted the loan, bundled with the wider budget bill, put before lawmakers before they switch their attention to November's elections.

Tough times

Falling sales, rising production costs and a steep rise in the cost of borrowing have made life tough for America's car giants.

They have also fallen behind their Asian rivals in producing smaller, cleaner vehicles, as consumers shun gas-guzzlers because of the soaring cost of fuel.

Critics of the bill said the financing would amount to state aid to prop up a struggling industry.

The carmakers themselves have said that while they could survive without the loan, tens of thousands of jobs could be lost.

"These loans amounts to a little more than 1% of the real bail-out - the one that the Bush administration wants for Wall Street at a cost of $700bn," said Republican John Dingell.

The Center for Automotive Research said Congress faced the severe choice of lending Detroit money now or dealing with the aftermath of a potential bankruptcy.

The loans were authorized, but not funded, in an energy law that requires carmakers to improve the fuel efficiency of their vehicles by 40% by 2020.

Carmakers argued that this law would cost up to $100bn to implement.

Meanwhile, the Senate also approved tax breaks as part of a renewable energy bill that would give consumers tax breaks of up to $7,500 for buying plug-in electric cars.

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