Business Secretary Lord Mandelson today announced a package of loans and guarantees for the "reinvention" of the British motor industry as a producer of greener vehicles.
Acknowledging the manufacturers and their suppliers were on the "front line" of the recession, he told the Lords the Government will offer guarantees to unlock £1.3 billion of loans from the European Investment Bank.
It will also offer a further £1 billion in guarantees or loans to cover investments which bring "special value" to Britain.
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A further £35 million could be made available to increase funding for workers in the automotive sector and there will be a "step change" in research for greener vehicles.
New trade and investment minister Mervyn Davies will also draw up a plan to improve the car companies' financing arms' access to funding.
Lord Mandelson said: "Today's measures will provide a specific boost to the industry, providing real help and laying the foundations of its reinvention for a low carbon future."
mf Lord Mandelson said: "The automotive industry - with its near one million employees from manufacturing to retailing and £10 billion worth of added value to the economy - is in the front line of the downturn, with output falling faster and further than any other sector since the summer."
The health of the sector was "vital to the strength of manufacturing in Britain" and action was needed to "prevent an irreversible loss of capacity, skills and technology".
But, he added: "This industry is not a lame duck and this is no bail-out.
"The industry has been transformed over the past decade.
"Productivity has risen, catching up and overtaking that in both France and Sweden.
"In Britain today, we have some of the world's most productive car plants.
"For the future, Britain needs an economy with less financial engineering and more real engineering.
"The car industry can and should be a vibrant part of that future."
He said there would be "no blank cheque" and "no operating subsidies" for the industry.
Any applications for Government support would need to offer value for money for taxpayers, help "green Britain's economic recovery", deliver "significant innovation" and support British jobs and skills.
Lord Mandelson said funding to support training could rise from £65 million to £100 million if there was demand from auto manufacturers.
The Regional Development Agencies will work with the Technology Strategy Board to help develop "cleaner engines, lighter cars, plug-in hybrids and components for electric vehicles".
The Government has already announced £250 million to support consumers switching to cleaner vehicles and Lord Mandelson said: "We want the car industry in Britain to meet that demand for low carbon cars."
The measures announced today would provide the industry with a "significant boost" while helping to make Britain "a world leader in the development and manufacture of low carbon vehicles".
The British government has announced a £2.3 billion package of aid to attempt to support the country's car manufacturing industry.
Peter Mandelson 
Lord Peter Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform announced to the House of Lords that the government planned to obtain £1.3 billion from the European Investment Bank for the industry. A further £1 billion loan is available if the industry agrees to invest it in environmentally friendly vehicles.

Mandleson told the Lords that the industry is vital to the British economy, which with "near one million employees from manufacturing to retailing" provides "£10 billion worth of added value to the economy." However, he stressed that the government was not providing a "blank cheque" and would not provide operating subsidies.

His newly-appointed shadow Kenneth Clarke told the House of Commons that the plans were "pretty small beer" and repeated the Conservative charge that the government was "dithering" in the face of the downturn. Liberal Democrat John Thurso also expressed disappointment in the plans.