General Motors has failed to motivate the government in incentivizing it’s takeover of Chrysler LLC owned by Cerberus Capital. The U.S. Treasury is not interested in funding the deal, which GM needs badly in order to survive and come up with the much needed funds to complete the takeover.

According to the White House, automakers should tap into the $25 billion allocated to the re-tooling of production lines, which has been available to them for quite some time. The $25 billion is to be used exclusively in order to make automotive production more fuel efficient. The U.S. Treasury does not want to begin a trend of bailing out businesses as it has been receiving bad press over it’s bailout of the financial industry.

General Motors in recent months has been losing $1 billion a month amidst a decline of sales. Future developments have been put on hold including the Suburban/Tahoe, Corvette, Malibu and Chevrolet Cruze models.

GMAC, the financial arm of General Motors is in the process of trying to change it’s commercial classification to become a bank in order to take advantage of the $250 billion bailout package, which has been allocated to the banking industry. Seems that is the only change GM has of taking over Chrysler in its entirety at this time and saving itself.

According to previous discussions even if GM does take over Chrysler, all but 7 models of Chrysler will be cancelled and about 50% of it’s current production plants will be shut down. Maybe it is best for Chrysler employees and the economy if this deal does not take place after all.

The Big Three, who can now almost always be referred to as the Detroit 3, as their sales no longer fit the “Big” criteria are lobbying congressional leaders for help.

The CEO’s of Chrysler, GM and Ford held meeting on Capitol Hill on Wednesday in hopes of securing the loans prior to the end of the government’s fiscal year.

D-Calif. Nancy Pelosi House Speaker was present at the meetings amongst other high ranking political figures.

Chrysler CEO Bob Nardelli and Ford CEO Alan Mulally were both responding to reporters in a very positive fashion about the proceedings. General Motors CEO Rick Wagoner on the otherhand had no comment.

The $25 billion loan that is in question is to be used exclusively for re-tooling of plants for more fuel efficient vehicles. In order for the loans to be used, the newly designed production vehicles have to be 25% or more fuel efficient then of those currently in the same class.

All 3 automakers plan to use the funds in order to retrofit their plants from truck to small and medium sized car production. The apparent problem is that none of the manufacturers are hopeful that they will meet the criteria to be 25% more efficient in terms of fuel mileage.

Timing is also very important to complete this deal, as the new fiscal year of the U.S. government begins on Oct. 1st.

In terms of timing both Congress and the White House have to sign off on the deal prior to the loans being available to the companies. So far the White House has dodged questions in the matter deferring the responsibility to Congress.

One must wonder, should the government not provide the $25 billion in funding, will the Big Three have trouble staying afloat, and if not will the Fed throw them a life-jacket?