Long-awaited plans to boost the ailing car industry are to be unveiled by Lord Mandelson this afternoon, although No 10 denied that they would amount to a "bailout".

The Business Secretary will tell the Lords at just after 3pm how he intends to meet motor manufacturers

There may also be help to enable the financing arms of car companies to access the Bank of England’s massive liquidity scheme.

The Prime Minister’s spokesman said: "Lord Mandelson and the Department have been making clear that, in our view, the car industry is a sector with a strong future.

"So not only are we in a position to provide some support to help them get through this difficult period but also, and this will be a very important part of the announcement, this is about how we provide the right support for them in the future."

Asked if it would include a cash injection, he said: "This is not a bailout."

But he made clear that it involved money set aside last year as part of the Government’s anti-recession strategy.

He said: "Provision was set aside at the Pre-Budget Report for a number of subsequent interventions and we will be allocating some of that provision. This is helping what the Government believes are fundamentally sound companies get through a difficult period."

Finance deals traditionally offered by car companies to people buying new or second-hand cars have dried up since the onset of the credit crunch.

Lord Mandelson met representatives of the Tata Group, which owns Jaguar Land Rover, when he was in India last week.

He is resisting demands from the unions to subsidise wages of workers forced on to short time working, but he and John Denham, the Skills Secretary, are drawing up plans to help threatened workers with retraining and reskilling when firms cut back to shorter working weeks.

The UK car industry employs about 800,000 people, but has suffered a dramatic fall in sales.

Production last month was almost 50 per cent down on December 2007, and Honda, Aston Martin, Jaguar Land Rover, Nissan and Toyota have all announced cutbacks.

Nissan, the Japanese carmaker, has cut 1,200 jobs at its Sunderland plant and Jaguar Land Rover has cut 450.

Lord Mandelson is scheduled tomorrow to meet officials from the Society of Motor Manufacturers and Traders (SMMT), which has warned that the industry is battling for its survival.

"The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability," the SMMT said in a statement.

"Urgent action is required to boost demand for new vehicles and ease the short-term cash flow pressures on UK automotive.”