Michigan congress members back billion-dollar federal aid package for U.S. auto industry

The flailing U.S. auto industry could be thrown a lifesaver if congressional plans to stage a bailout go ahead. A party led by Michigan's congressional delegation is attempting to secure funds that would give U.S. auto manufacturers up to $27 billion in federal aid over the next five years and allow them to finance restructuring programs and retooling of plants to respond to changing market demand.

While the U.S. congress has previously been reluctant to bailout any sectors of industry, they may be willing to budge for the auto industry - 71 congress members have supported a proposal to give the auto industry $25 billion in loan guarantees, reports The Detroit News. These guarantees would allow manufacturers to recoup 30% of the cost of retooling plants and restructuring in order to become more competitive, with the condition that the investment takes place in the U.S.

The delegation also called for the provision of $5 billion in direct loans over the next 5 years, 40% of which would come in the form of tax breaks. On top of this, an $800 million advanced battery fund is also being called for in order to speed up development of a more practical electric car to get consumers to switch.

While the proposal still remains in discussion, certain industry analysts are calling any significant bailout scheme an unlikely proposition. However, the same analysts predict that without such bailouts carmakers may be forced to resort to more drastic cost cutting measures in the near future.