Congress outlines green car rescue package

The ailing US auto industry could soon receive a major shot in the arm in the form of $25bn in low interest loans from the federal government, designed to help manufacturers meet new fuel efficiency standards and accelerate the development of low carbon vehicles.

According to Reuters' reports, Congressional Democratic leaders have expressed their support for the proposal with House of Representative Speaker Nancy Pelosi describing the low interest loans package as "very important to our country".

Under the proposals, major manufacturers such as Ford, GM and Chrysler would be eligible for credit assistance as they seek to shift production from the gas-guzzling SUVs and trucks that have represented their cash cow for much of the last decade, to more vehicles capable of meeting recently introduced standards that require an improvement in fuel efficiency of 40 per cent by 2020.

The funding is also expected to support efforts to scale up the production of alternative fuel cars such as electric vehicles.

However, legislators will face an uphill struggle to get the necessary legislation passed in the short term.

Congress is due to break up at the end of the month ahead of the US presidential election and may not reconvene this year. Pelosi hinted that the legislation could be included in other packages to try and get it passed before the end of September, but it is more likely that the issue will have to wait until early next year.

The proposals are also likely to face Republican opposition with a senior official in the Bush administration hinting that the move could struggle to secure support. "Obviously when what is being proposed is taxpayer support for private companies," he told Reuters. "That's not something that should be done without serious deliberation of the consequences."

However, the auto industry has been at pains to insist that the loans do not represent a rescue package, arguing instead that it is simply a means of financing the huge structural changes that are required to meet the federal government's own fuel efficiency standards.