Detriot close to getting $25 billion in Government loans

Image by Getty Images via Daylife With Detroit automakers getting close to receiving $25 billion dollars in low interest government loans to try and stop some of the bleeding profits, there has been a lot of speculation on just what those dollars will be used for.

The government will only support investment in vehicles that improve fuel economy by at least 25 percent compared to their respective segments. In other words, don’t look for any federally funded V-8 muscle cars. The key to benefiting from these loans will lie in how far along automakers are in developing green cars.

For GM and Ford, the loans will turn out near immediate results. Both automakers already have advanced fuel-saving technologies, and can use the loans to implement them on a larger scale.

GM can offset costs for its Chevrolet Volt. It may also spread its Two Mode hybrid system (left) to other models. Right now, the system is only on its expensive full-size SUVs, but GM could use some of the loans to implement it on everything from the Buick Enclave to the Chevrolet Malibu.

GM could also produce more diesel engines and speed along development of its homogeneous charge compression engines. The engines supposedly combine the best attributes of gasoline and diesel, and are currently due around 2015.

Ford, meanwhile, can use the money for its upcoming Escape (top) and Mercury Mariner plug-in hybrids and its efficient EcoBoost engines, the first of which will appear in the Lincoln MKS. It could also consider bringing over more diesel engines along with its European small cars.

Chrysler, on the other hand, could find itself in a bit of a quandary. It certainly needs cash, but does not seem to have many programs for which the loans can apply. Chrysler could, like GM, spread the Two Mode hybrid system from its trucks to cars like the Chrysler 300 and Dodge Charger. It may also apply the loans for its next generation of Cummins diesel truck engines, due out in 2010.

Import brands that build cars here are technically eligible for the loans, but will have difficulty meeting the requirements. In particular, the loans will give preference to automakers retooling plants more than 20 years old.

It will be your money backing these loans (estimated cost to taxpayers: $7.5 billion). There has been some backlash regarding the loans. Some compare this move to one that likens the U.S. to China, who regularly fund Chinese owned businesses.

I look at it this way. American automakers are in trouble, as a result of their attempts to satisfy the public desire for large and powerful vehicles. No speculation could have seen the current gas crisis coming. I would much rather the government attempt to help these companies than see them defect overseas, which is the other alternative.