UPDATE 2-Ford adds new urgency to auto loan lobbying

(adds GM CEO comments)

By John Crawley

WASHINGTON, Sept 16 (Reuters) - Bill Ford, chairman of Ford Motor Co (F.N), added new urgency on Tuesday to industry lobbying for $25 billion in government loans, with financial sector turmoil prompting some in Congress to seek assurances privately that help for automakers would not be a bailout.

Ford said he came away from meetings with a sense that lawmakers understood the financial services meltdown -- including late word of a massive government rescue of insurance giant American International Group (AIG.N) -- was distinct from action to help automakers finance more fuel efficient vehicles.

"I don't think there has been any confusion at all," he said.

Nevertheless, there is some indication that worsening corporate upheaval involving major financial firms and the deepening regulatory response has cast a shadow over efforts to get quick congressional approval of billions in funds needed to issue the low interest loans to the auto industry.

"There are a lot of questions, unfortunately, with what's happening in the financial markets this week," Rep. Candice Miller, a Michigan Republican, said after attending a meeting with Ford that included other members of the Michigan and Ohio delegations.

"It's not a walk in the park," Miller said. "We keep trying to educate members that this is not a bailout."

Those lobbying for help are telling anyone who will listen on Capitol Hill that industry will pay back the loans -- with interest -- just like Chrysler did in the 1980s when it received loan guarantees to survive.

Despite mounting concern about massive corporate bailouts and the quickening pace of business in Congress under a compressed timetable for action on several fronts, Miller said support among Democrats and Republicans is building for the automakers.

Congressional leaders have said they hope to attach money for the auto loan program on must-pass spending legislation that is likely to be signed by President George W. Bush.

Detroit's allies in Washington, Miller said, were "cautiously optimistic" the loans would be activated before members return to the campaign trail next week. It is unclear if Congress will resume work after the Nov. 4 election.

Bill Ford said the money, if approved, would help his company accelerate its turnaround plan and meet government mandates for the industry to improve fuel efficiency by 40 percent by 2020.

He also stressed that the upheaval among financial firms "makes it hard for everyone, not just companies" to access credit.

General Motors Corp (GM.N) Chief Executive Rick Wagoner, speaking to reporters on Tuesday night after addressing the Washington Economic Club, said the loan amount that GM might receive -- analysts estimates have topped $2 billion -- would help with capital spending but also improve the company's poor finances.

"It would help us with other funding sources -- maybe not in today's market conditions, but over time," Wagoner said, stressing that the condition of credit markets overall and the U.S. economy are crucial factors.

Wagoner said GM prefers quick congressional approval, which some insiders say could free up loans early next year if regulations are quickly drawn up.

"I'm not sure of the value in waiting," he said.

Up to $25 billion in low-interest loans were included in last year's energy law to help automakers develop fuel saving technologies, but Congress must approve at least $3.8 billion in default-risk funding to activate the financing.

The Congressional Budget Office (CBO) now estimates the potential hit to taxpayers for covering default risk and issuing the loans could rise to $7.5 billion, another issue that arose in the past few days that lawmakers are trying to sort through.

The loan program is open to all auto companies and their suppliers but it was mainly created by Congress to help Ford, GM and Chrysler LLC, who face prohibitively expensive credit because of their financial problems. (Reporting by John Crawley; Editing by Phil Berlowitz and Lincoln Feast)