LORD Mandelson urged car manufacturers to slash back production at the same time as investing billions in new products, ahead of a fact finding visit to the North-East this morning.

The Business Secretary used a visit to Nissan, in Sunderland, to spell out his prescription for car companies feeling the pinch.

He urged the industry to cut back on over production in the face of extreme loss of demand, but still investment in future markets and future products.

The Business Secretary was speaking ahead of a visit today to the Nissan car plant in Sunderland where a new model will be built next year.

And despite frustration among some industry experts that the Government appears to be dragging its feet over help for beleagured factories, he told the BBC: ‘‘The car manufacturers, their huge supply chain, are a cornerstone of our manufacturing sector.

‘‘They employ very, very many people, so their survival is important, and they will survive, they will thrive in the future, as long as they make the right decisions now.’’ He sidestepped a question about the industry’s wish for a ‘‘scrappage’’ scheme to be introduced, under which motorists would be paid to trade in their old cars for more eco-friendly models, a policy which has been introduced in a large number of European countries.

The peer said last month that ministers were looking at such schemes, but no decision has been announced.

Today he pointed out that the Government had created an assistance package ‘‘to make sure that these vital companies do not cut back and harm their capacity, both their plant, their research and their development, as well as their very skilled workforce, in a way that would find it more difficult for them to take advantage of the upturn when it comes.’’ And he added: ‘‘So both through their access to European Investment Bank loans, which the Government here is prepared to guarantee, as well as the loans and guarantees that we are prepared to offer to the industry, domestically, we are going to make sure that where these companies are viable going concerns - and in the overwhelming majority of them that is the case - they do have a future.’’ But some industry pundits say the Government's apparent largess only extends to research and development of new environmentally friendly vehicles. There are no loans on offer to see car companies over their current pain, similar to those already granted to American car manufacturers and suppliers.

During a visit to Nissan Mr Mandelson had a sneak preview of the new Qazana model - a "concept" version of a tamer hatchback to be built in the North-East next year.

Ironically, the Qazana does not use hybrid propulsion nor full electric power.

The UK Government hopes it can persuade Nissan to make this country the European base for a factory to build batteries that will power a new generation of clean, green machines.

But several other European countries, including Spain and France, are already bidding for the same investment.

Along with other car manufacturers in Britain, Nissan has reduced its output and announced in January it was cutting 1,200 from its 5,000-strong workforce.

Lord Mandelson will later visit Smith Electric in nearby Washington, Tyne and Wear, a world leader in electric vans and trucks.

The firm is Ford’s official collaborator on electric vans, producing a battery-electric version of the Ford Transit, which is on sale across Europe.

It will build a US version of its electric van for Ford ready to launch next year.

This afternoon he will visit PETEC, the UK’s national printable electronics technology centre, which carries out research and design for customers.

The centre is based at Sedgefield’s hi-tech NETPark and helps researchers get their ideas into the marketplace.