Ford Motor Co will receive nearly $5.9 billion in U.S. government loans to build fuel-efficient vehicles as the Obama administration deepened its commitment to reshaping the cash-strapped auto industry.

Japan's Nissan Motor Co Ltd will receive $1.6 billion and start-up Tesla Motors Inc will receive $465 million in low-cost loans to build all-electric cars in the first wave of financing from an Energy Department program intended to offset the cost meeting sharply higher new fuel economy standards.

By supporting key technologies and sound business plans, we can jump-start the production of fuel-efficient vehicles in America, Energy Secretary Steven Chu said at an event at Ford's sprawling engineering and product development campus.

These investments will come back to our country many times over by creating new jobs, reducing our dependence on oil, and reducing our greenhouse gas emissions, he said.

The Energy Department has $17 billion remaining in funding under a program first authorized by Congress in 2007. Chu said the agency would work quickly to approve further loans in the coming months to other auto companies.

The announcement of the first round of funding at Ford represented a win for the automaker, the United Auto Workers union and Michigan's congressional delegation after an intense lobbying effort to get the long-stalled funding approved.

One of the conditions of receiving the subsidized loans was a determination of viability. That ruled out Ford's rivals Chrysler and General Motors Corp since they have been pushed through a federally funded bankruptcy process.


Ford will receive loans through 2011 to retool factories in Michigan, Ohio, Illinois, Kentucky and Missouri. Part of the funding will cover the cost of converting two truck plants to make new small cars.

The loan is part of a $14 billion investment Ford plans in advanced technology vehicles over the next seven years. The automaker hopes most of that will come from government loans.

Chu said the Obama administration was already in talks with Chrysler Group on new funding. The No. 3 U.S. automaker, which is majority owned by a union health care trust, is operating under the management control of Italy's Fiat SpA.

Fiat has pledged to build a new small car at one of Chrysler's U.S. plants.

GM, which remains in Chapter 11, has been having technical discussions with U.S. officials on its planned projects that could qualify for funding, Chu said.

GM plans to emerge from bankruptcy through a sale process similar to the one used at Chrysler. The new GM will be majority owned by the U.S. Treasury.

There is money there -- I wouldn't say set aside -- but we are trying to stretch these dollars as far as we can, Chu told reporters when asked about funding for GM and Chrysler.

Before Tuesday's announcement, the Obama administration had already committed almost $80 billion in emergency funding for the embattled U.S. auto industry. That includes bankruptcy financing and other loans to GM and Chrysler, support for parts suppliers and an investment in GMAC LLC.

Ford is the only U.S. automaker that has not received bailout funding, opting to go it alone with a strategy of cutting labor costs in negotiations with the UAW and reducing debt through market transactions.

Mulally said the government loans would help Ford transform its line-up to focus more on small cars, hybrids and pure electric-drive vehicles. It will give us a competitive advantage in that we are making the vehicles that people really want and value, he said.

Nissan qualified for the loans because its Smyrna, Tennessee

plant is over 20 years old. The Japanese automaker will use the funding to build a battery assembly facility and retool an existing line to build a new electric car starting in 2012.

Tesla, based in San Carlos, California, will receive funds to bring its Model S battery-powered sedan to market. The start-up markets an electric sports car for over $100,000 but plans to slash the cost of its second model -- a family sedan -- by almost half.

Founder Elon Musk, who has said Tesla could turn profitable by next month, called the federal funding a vote of confidence.

In order to put to rest any question of business viability we thought it was a pretty important thing to aspire to, he said. Fortunately we've been able to achieve it.

(Additional reporting by John Crawley, Nichola Groom and Bernie Woodall; editing by John Wallace, Tim Dobbyn and Bernard Orr)