Feb. 9 (Bloomberg) -- Nissan Motor Co. is Japan’s only carmaker seeking a federal loan under a U.S. program for fuel- efficient autos, competing for funds with General Motors Corp., Ford Motor Co. and electric-car start-up Tesla Motors Inc.

The Energy Department may disburse some of the $25 billion in low-cost loans to successful applicants in one to two months, Energy Secretary Steven Chu said Feb. 6. Rules for the program were set in November and the agency received 75 applications for projects totaling $38 billion, spokesman Phil West said. Of those, only 26 were “substantially complete,” he said.

Unlike the $17.4 billion in emergency federal loans GM and Chrysler LLC won to avoid bankruptcy, the Energy Department funds are part of 2007 legislation creating tougher fuel-efficiency rules. Any manufacturer can apply as long as the money is used to make autos at U.S. factories that produce cars with at least 25 percent better fuel economy.

“This is an option available to us,” said Alan Buddendeck, Nissan’s U.S. vice president of communications, who declined to specify the amount the company is seeking or the models for which the funds are intended.

Nissan said today it will cut 20,000 jobs and post its first annual loss in nine years as auto demand crumbles and the yen’s strength cuts the value of overseas revenue. Nissan’s U.S. sales declined 31 percent in January.

The company’s American depositary receipts fell 23 cents, or 3.7 percent, to $5.98 at 4 p.m. New York time in Nasdaq Stock Market trading. The ADRs have dropped 18 percent this year. Nissan declined 5.8 percent to 261 yen in Tokyo Stock Exchange trading.

Meets Requirements

U.S. officials notified Japan’s third-largest carmaker that its application met initial requirements, and the request entered the second of four approval stages, Buddendeck said. Nissan declined to give Bloomberg a copy of its application, and Energy Department spokesman West said companies aren’t required to release such documents because they contain confidential financial details.

Nissan’s move contrasts with bigger Japan-based competitors Toyota Motor Corp. and Honda Motor Co., neither of which sought the funds. Nissan’s application may draw complaints from those questioning whether the program should be open to foreign companies, said analyst Jim Hall, principal of 2953 Analytics in Birmingham, Michigan.

“Someone will probably criticize them,” Hall said. “Someone always will. But the program is set up to be open to all.”

Legislation Criticized

The loan program is flawed, said Alan Tonelson, a research fellow at the U.S. Business & Industry Council, a Washington- based trade group for family-owned businesses.

“A great deal of this money will be misappropriated to recipients that do not deserve it,” Tonelson said. “The Nissan application and its possibility of receiving these funds points to weaknesses in the way this legislation was written.”

He faults the program for not requiring that models built using the funds also contain high levels of U.S.-made parts and materials. Automakers and industry analysts disagree about how to measure domestic or North American content.

“It’s widely understood that these companies are doing business here and employ thousands of workers at U.S. manufacturing facilities,” Buddendeck said.

Plunging sales amid the global recession has drained carmakers’ revenue, complicating plans for models that use less fuel and reduce carbon exhaust. Ford reported the biggest annual loss in its 105-year history last month, and Toyota said it may lose almost $5 billion on operations this fiscal year.

Nissan’s net loss was 83.2 billion yen ($908.7 million) for the quarter that ended in December and it projected a 180 billion yen operating loss for its year ending in March.

Ghosn’s Prediction

Nissan has 13,000 U.S. employees, GM has 94,000 and Chrysler has 38,257. Ford won’t break out the U.S. workforce from its 75,200 employees in North America.

Carlos Ghosn, Nissan’s chief executive officer, has said the company will be a leader in pollution-free electric cars, and announced plans for new fuel-saving gasoline-electric hybrids and battery-only models due in the next few years.

The U.S. loan program gives preference to companies that use the financing to revamp factories at least 20 years old. In Nissan’s case, its Smyrna, Tennessee, plant that already builds Altima hybrid sedans meets the requirement, Buddendeck said.

While Nissan is reluctant to detail its loan plans, Tesla, the San Carlos, California-based company that began delivering $109,000 battery-powered Roadsters last year, has staked its future on receiving as much as $450 million of the so-called Section 136 loans.

Tesla’s Plan

CEO Elon Musk, closely held Tesla’s biggest investor, has said he’ll use the money for a plant to make electric sedans and to build battery packs for other carmakers.

Nissan and Tesla both deserve to be among the applicants, based on their plans to mass-market electric cars, said environmental lawyer Dan Becker, director of Safe Climate Campaign in Washington.

“The goal of the program is to move advanced-technology vehicles,” Becker said. “For that reason the startups should be at the front of the line. Of all the major auto companies, Nissan appears to have the most aggressive plan.”

GM plans to use Energy Department funds to make models including plug-in Volt sedans. The Detroit-based company requested loans totaling $8.3 billion, spokesman Greg Martin said.

Ford, based in Dearborn, Michigan, is seeking $5 billion to build more efficient versions of 90 percent of its models by 2014, spokesman Mike Moran said.

Toyota, the world’s largest automaker, didn’t consider applying, said Irv Miller, U.S. group vice president.

‘Not Interested’

“We’re not interested in being beholden to the government,” Miller said. The company said last week that it expected to report its first annual loss in 71 years for the year ending in March.

Tokyo-based Honda, which still expects to be profitable this year, didn’t apply because it funds advanced technology internally, said Ed Cohen, vice president for U.S. government affairs.

“If it’s worth doing, we’ll do it on our own,” he said.

Miller and Cohen said their decision wasn’t made on concern they would be criticized for seeking U.S. loans.

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Tina Seeley in Washington at tseeley@bloomberg.net

Last Updated: February 9, 2009 16:13 EST