Energy
Secretary Steven Chu said the three automakers would be the first
beneficiaries of a $25 billion fund to develop fuel-efficient vehicles.
The loans to Ford will help the company
upgrade factories in Illinois, Kentucky, Michigan, Missouri and Ohio to
produce 13 fuel-efficient vehicles.

Nissan will receive loans of
$1.6 billion to retool its plant in Smyrna, Tenn., to build electric
vehicles and construct a battery manufacturing plant. Tesla will 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 at Ford’s Research and Innovation Center. “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 requested $38
billion from the loan program, which was created last year to give car
companies and suppliers low-interest loans to retool their facilities
for 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 loans will help Ford
convert two truck plants to produce cars and help the company raise the
fuel efficiency of nearly 2 million new vehicles a year. The government
said it will help Ford transform nearly 35,000 jobs into “green” engineering and manufacturing jobs.

Ford
has said it intends to bring several battery-electric vehicles to
market starting next year, with a plug-in hybrid vehicle coming by 2012.

“We want to be in every market segment in the U.S.,” said Ford CEO Alan Mulally. “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. The company would have faced much higher interest rates from private lenders.

Ford
can draw from the loan for work done to retool its plants going back to
late last year, Moran said. Priority was given to plants at least 20
years old and the facilities must build cars that improve fuel
efficiency by 25 percent.

Nissan said it would use its $1.6
billion loan to modify its Smyrna, Tenn., plant to produce
zero-emissions vehicles and build a new facility to produce lithium-ion
battery packs. 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.

The electric car will initially be built in
Japan. Dominique Thormann, Nissan North America’s senior vice president
for administration and finance, said the loans could create up to 1,300
jobs at the two facilities and lead to U.S. production of the electric
car beginning in 2012.

Nissan Chief Executive Carlos Ghosn said
in Japan that the U.S. would be “a very important market” for the
company’s electric strategy. “I can tell you I’m not at all worried
about how to sell these cars because there is an appetite for
zero-emission cars.”

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.”

General Motors Corp. has requested $10.3 billion in
loans from the energy program, while Chrysler Group LLC has asked for
$6 billion. Energy officials have said the loans could only go to
“financially viable” companies, preventing GM and Chrysler from
qualifying for the first round of loans.

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. GM officials said they hoped to get the money shortly after
emerging from bankruptcy protection.