UPDATE 2-Ford ready to seek loans guaranteed by government

(Adds details from Ford CEO on economic outlook, background)

By David Bailey

DEARBORN, Mich., Sept 8 (Reuters) - Ford Motor Co(F.N) is ready to seek low-interest loans backed by the U.S. government for new fuel-saving technologies, CEO Alan Mulally said, as industry backers press for up to $50 billion of such funds.

Mulally, declining to confirm whether he would lobby personally in Washington this week for loan guarantees, said on Monday he believed lawmakers now take a more favorable view of industry efforts to increase fuel-efficiency.

"I think last year was a turning point," he told a business group meeting in Dearborn. "I was very pleased with the reception we got for what we are doing on fuel efficiency."

Mulally, whose remarks came the day after the announcement of a government takeover of mortgage finance companies Freddie Mac (FRE.N) and Fannie Mae (FNM.N), said government support for the U.S. auto industry would not be a bailout.

"The only conversation we have now is, what is the right way to finance, and what is the right provision for deciding which companies participate," he said. "We are very positive."

An energy bill passed by Congress in December mandated a 40 percent increase in vehicle fuel efficiency standards by 2020 but also included a provision for $25 billion of loan guarantees to support plant retooling.

Lawmakers have not yet approved the funding for that program. To meet provisions in the law, Congress would have to approve spending $3.8 billion of taxpayer funds to cover the potential default costs of $25 billion in low-interest loans.

In recent weeks, some auto industry executives have suggested that a larger loan program could be in order.

The industry is interested in obtaining another $25 billion in loans not covered in the existing legislation.

General Motors Corp GM.N CEO Rick Wagoner said last month that GM was also interested in pursuing federal loan guarantees.

Wagoner declined to say how much financing GM or its suppliers could seek under such a program.

BATTLEGROUND STATES

Lawmakers and President George W. Bush have at times been seen as indifferent, if not hostile, to supporting the auto industry.

But Republican presidential candidate John McCain and Democratic candidate Barack Obama both have expressed interest in helping the industry make the transition to producing electric and other alternative vehicles.

In lobbying, the industry will attempt to leverage auto-related economic troubles in battleground states like Michigan to pressure Washington ahead of the Nov. 4 U.S. presidential election.

At a time when credit downgrades have pushed borrowing costs sharply higher for Ford, GM and Chrysler [CBC.UL], loan guarantees could make it much cheaper for carmakers to borrow the billions they say they need to invest in next-generation battery technology for electric cars or fuel-cell vehicles.

Mulally said Ford has the cash it needs to push ahead with its immediate restructuring and to invest more in an accelerated development of smaller cars.

"We are in very good shape as far as liquidity," Mulally said, describing current conditions as among the toughest he has seen in his nearly four decades in U.S. industry.

Mulally also said he believed the U.S. economy had slipped into recession and that oil prices would remain high.

"When you back up and look at it globally, not only is the United States clearly in a recession and it is not getting any better, but also the rest of the world now is starting to slow down," Mulally said.

"Europe and the Middle East are slowing down also."

Record-high gasoline prices and consumer uncertainty tied to a slumping housing market have combined to send U.S. auto sales down by 11 percent this year through August.

Ford's sales have dropped 15 percent, and the No. 2 U.S. automaker said last week that it would cut its second-half output by 50,000 vehicles from its prior plan in response to the weaker market. (Additional reporting by Poornima Gupta and John Crawley, writing by Kevin Krolicki; editing by Leslie Gevirtz, Steve Orlofsky and Ted Kerr)