AMERICA’s beleaguered carmakers were given a breathing space this weekend after lawmakers signalled they would approve an interim $17 billion (£11.6 billion) loan package.

Final confirmation of the loan, which will come from funds set aside for investment in green automotive technology, is expected to come from the White House and Congress this week.

An impasse over aid for General Motors, Ford and Chrysler was broken late on Friday, when Democrat Nancy Pelosi, the Congress speaker, dropped her opposition to use of the environmental fund.

The talks were given added impetus by disastrous US job figures released on Friday. More than 500,000 Americans lost their jobs in November — the highest monthly total in more than 30 years.

Details of the loan were being hammered out over the weekend. They are expected to include a commitment to quickly top up the $25 billion green technology fund – which was originally set up only to allow carmakers to invest in the tools needed to make new, fuel-efficient cars – and the establishment of a Washington committee to oversee government investments in the industry.

The expected loan falls short of the $34 billion executives of the big three Detroit firms asked for when they made personal appearances before legislators in Washington last week. It should be enough, however, to tide them over until March, analysts say, during which time a larger restructuring can be agreed.

One option is for a merger of GM and Chrysler to be engineered, with both groups going into chapter 11 bankruptcy, which shields companies from their creditors. Chapter 11 would allow rapid and far-reaching changes to labour contracts and speed plant closures.

It should also allow the heavily-indebted Detroit firms to negotiate a reduction in the size of their loans, with creditors likely to take shares in the firms in return for cancellation of the sums outstanding.

Pelosi and other Democrats had opposed use of the environmental funds, fearing they would let carmakers off the hook on fuel efficiency.

They favoured tapping the $700 billion that was set aside by Treasury secretary Hank Paulson for bailing out financial institutions.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats