DEARBORN, Mich. – The Energy Department said Tuesday it would lend $5.9 billion to Ford Motor Co. and provide about $2.1 billion in loans to Nissan Motor Co. and Tesla Motors Inc., making the three automakers the first beneficiaries of a $25 billion fund to develop fuel-efficient vehicles.
Energy Secretary Steven Chu announced the loan recipients at Ford's Research and Innovation Center in Dearborn. The loans to Ford will help the company upgrade factories in five Midwest states to produce 13 fuel-efficient vehicles.
Nissan was receiving $1.6 billion to retool its plant in Smyrna, Tenn., to build advanced vehicles and build a battery manufacturing facility. Tesla would get $465 million in loans to build electric vehicles and electric drive powertrains in California.
The loans were designed to help auto manufacturers meet new fuel-efficiency standards of at least 35 mpg by 2020, a 40 percent increase over current standards.
"These loans will help the auto industry meet and even exceed the president's tough fuel standards," Chu said. "This is part of President Obama's commitment to a new energy strategy for America. ... This means the most fuel-efficient cars in the world must be made right here in America."
Dozens of auto companies, suppliers and battery makers have sought a total of $38 billion from the loan program, which was created last year to provide low-interest loans to car companies and suppliers retool their facilities to develop green vehicles and components such as advanced batteries.
Ford had been seeking about $5 billion in loans by 2011 and a total of $11 billion from the program to invest $14 billion in advanced technologies over the next seven years. The company said it will transform plants in Illinois, Kentucky, Michigan, Missouri, and Ohio.
Ford CEO Alan Mulally said in an interview with The Associated Press that the department approved the company's entire proposal through 2011 and it would help Ford meet the new fuel efficiency standards.
"This is a tremendous development," Mulally said.
He said the loans would help Ford further its strategy to build a wide range of fuel-efficient cars.
"We want to be in every market segment in the U.S.," Mulally said. "Every year forever we want to continue to improve fuel efficiency."
Ford expects to begin repaying the loans in 2012, with an interest rate based on the current U.S. Treasury rate hovering between 3 and 4 percent, said Ford spokesman Mike Moran.
"If it were at market rates it would be in the double digits," he said. "That's a huge thing for us."
Ford can draw from the loan for work done to retool its plants going back to late last year, Moran said. The plants must build cars that improve fuel efficiency by 25 percent.
General Motors Corp. and Chrysler Group LLC have received billions of dollars in federal loans to restructure their companies through government-led filings for bankruptcy protection, but Ford avoided seeking emergency aid by mortgaging all of its assets in 2006 to borrow about $25 billion.
Mulally said the loans Ford would receive from the Energy Department were part of a government-industry partnership and "had nothing to do with the emergency loans to keep General Motors and Chrysler in business."
Ford has said it intends to bring several battery-electric vehicles to market. The automaker has discussed plans to produce a battery-electric vehicle van in 2010 for commercial use, a small battery-electric sedan developed with Magna International by 2011 and a plug-in hybrid vehicle by 2012.
General Motors has requested $10.3 billion in loans from the energy program, while Chrysler has asked for $6 billion in loans. Energy officials have said the loans could only go to "financially viable" companies, preventing GM and Chrysler to qualify for the first round of the loans.
Elizabeth Lowery, GM's vice president of environment, energy and safety policy, said GM still must pass the Energy Department's financial viability test before it can receive loan funding and the company hoped to get the money shortly after it emerges from Chapter 11 bankruptcy protection.
Chu said the Energy Department has started discussing details of the loans with Chrysler and has begun reviewing the "technical side" of the loan requirements with GM.
Nissan said the $1.6 billion loan would be used to modify its Smyrna, Tenn., plant to produce zero-emissions vehicles and lithium-ion battery packs to power them. The Japanese company has previously outlined plans to develop an all-electric car with 100 miles of pure battery range for release in late 2010.
"This loan is an investment in America. It will help us put high-quality, affordable zero-emissions vehicles on our roads," said Dominique Thormann, Nissan North America's senior vice president for administration and finance.
Tesla, based in San Carlos, Calif., will use $365 million for production engineering and the assembly of the Model S sedan, an all-electric vehicle that is expected to travel up to 300 miles per charge and go on sale in 2011. It will use $100 million for a powertrain manufacturing plant expected to employ 650 workers.
Tesla CEO Elon Musk said the automaker would use the loan "precisely the way that Congress intended — as the capital needed to build sustainable transport."