The steep decline in vehicle sales and rapid shift in the market to smaller cars has prompted major American automakers General Motors, Ford Motor and Chrysler to seek a significant increase in the $25 billion government loan program authorized last year to help them build more fuel-efficient vehicles.

Now, they are reportedly looking at up to $50 billion in low-interest loans over three years to help them modernize their assembly plants and develop next-generation fuel-efficient vehicles. The carmakers, each of which has lost billions of dollars in the last several years, say the loans would allow them to overhaul their plants more quickly than they can otherwise afford to in a dismal time for the US auto industry. (See: US auto sales limp at 16-year lows and General Motors announces massive $15.5 billion quarterly loss)

Approval for the loans was included an energy bill enacted in December, as a means of helping the companies and their suppliers meet stricter fuel economy regulations. The US Congress would need to appropriate $3.75 billion to provide up to $25 billion in low-interest loans to car companies and their suppliers, according to a July 25 letter to House Democratic leaders.

The plan, which is still being discussed, calls for $25 billion in loans to be available in the first year, followed by an additional $15 billion in the second year and $10 billion in the third year, industry officials said. To activate the full $50 billion in loans, Congress would need to set aside about $7.5 billion to guard against a loan default.

The carmakers appear to have the backing of both major presidential candidates, Senator John McCain and Senator Barack Obama. The former had also mooted floating a multi-million dollar prize for developing an efficient car battery. (See: US Presidential candidate John McCain proposes $300 million prize for better car battery)

Ford recently said it was spending billions of dollars to convert three North American truck factories into plants that can make small cars like the Ford Fiesta. Chrysler, the smallest of the Detroit car companies, said last week that it would spend $1.8 billion so it could build crossover vehicles at a Detroit plant that now makes sport utility vehicles. (See: Ford announces $8.7-billion quarterly loss, goes for major restructuring)

Officials from GM and Ford declined to specify how much money their companies needed from the government.

The loans in the energy bill showed how "government policy can be aligned with consumer demand and the efforts of the industry," said GM spokesman Greg Martin. Mike Moran, a Ford spokesman, said, "Congress created a program for direct loans and we're hopeful that they can fund those this year."

The loans would not be limited to the Detroit carmakers. They are designated for any American factories at least 20 years old, which includes plants operated by suppliers and foreign-based manufacturers like Honda.