Sources say that the federal funds will be used to provide loan grants to automotive suppliers, auto finance companies and automakers.

The first $350 billion funds were released to fund emergency loans to automotive companies such as Chrysler LLC an General Motors.

The second round of $350 billion was released after aids to new President Barack Obama ensured that the funds will strictly be controlled, insiders say.

Obama designee National Economic Council Chairman, Larry Summers, said in a letter that the second $350 billion funds will not be allocated to industrial policies. He also said that the automobile companies will only receive the additional aid provided that they have a concrete reconstruction for long-term viability.

The releasing of the second bailout funds was met with uncertainty as criticism of how the Bush administration handled the first $350 billion arose. Reports have said that the first funds were used in bank investments instead.

Part of the second federal funding is set to be used for a loan to Ford Motor Corporation. Although the pioneering automobile company has yet to ask for an immediately loan, it has already expressed interest in a $9 billion loan should the market conditions prove to be worse.

Obama, citing that the first release of funds lack transparency and accountability, said in a statement that he will provide loans instead to small businesses. He said that to keep the faith of American tax payers, it is necessary that they see where their taxes go.

During a recent speech engagement in front of the joint session of the U.S. Congress, President Barack Obama holds accountable the car manufacturers for their bad practices that pushed them to the brink while fighting the current recession.

The US President promised though to help them regain their grounds to be able to compete again and win the auto industry. Obama also pinpointed the millions of jobs depending on car manufacturing.

The Obama led government is taking actions to help revive the ailing car industry. The US President backed up the plans of former president George W. Bush in pushing for the emergency loans amounting to $17.4 billion to GM and Chrysler LLC.

The federal government has activated several taskforce to study the restructuring plans of the car manufacturers which are asking for an additional loan of $21.6 billion. They are also looking into the call for help coming from suppliers amounting to $18.5 billion.

During this first appearance before the Congress, Obama presents the focus of his budget. The president explained that the government cannot attempt to solve every problem but would rather deal on the most critical issues on health care, energy, and education.

Obama foresees renewable energy as the dictating force of the future. He looks at China as one of the current stalwarts to make their economy energy efficient. The 44th US president also cites the US as the front runner of solar energy but is now falling behind Japan and Germany. He also mentioned hybrid vehicles made by Americans but running on Korean-made batteries.

The speech of the president paints the picture of reality and at the same time re-enkindles hope for everyone including the auto manufacturing industry.

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It was a picture of bad going to worse going worst for major players in the car industry. GM had its darkest dropped in sales since 1959 while Ford had their most horrible performance since 1961.

Toyota’s sale was down by more than 30 months for two consecutive months so is Nissan’s which was struggling for 4 consecutive months. Chrysler sold 53.1% lower compared to 2007.

Year over year, the December total for the US auto industry was lower by 35.6% despite car manufacturers throwing in incentives to close deals. The December figure marked the fourth month where the drop in sales went over 25%. The car manufacturing sector is one of the hardest hit by the longest recession since the 1980’s. The federal government is still thinking of throwing a life line for GM and Chrysler.

The average incentive offered by car makers is around $2902 per vehicle last December. Year over year, this is bigger by 18% and abut 8% more generous than what they gave last November.

Car sales as it lowest, predicted by experts just to hit the 10 million mark. November was at 10.3 million which is the lowest in the last 26 years. The December statistics show an insignificant jump to 10.4 million.

Despite the bail outs, consumer confidence is low amid a future that is very difficult to forecast.

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