Cash-strapped Ford Motor Co. (F) announced plans to sell its 20% stake in Mazda Motor Corp. (MZDAY)

The auto maker will raise more than $538 million from the sale, but remains Mazda's top shareholder, owning 13% of the Japanese car maker. Ford has held a stake in the company since 1979.

Mazda said two board members -- Chief Financial Officer David Friedman and sales and marketing chief Daniel Morris -- would return to Ford.

Ford CEO Alan Mulally said in a statement the sale "will help fund our product-led transformation," while allowing both firms to continue their strategic partnership.”

Separately, Mazda said it plans to buy back 6.87% of its own shares from Ford for up to $185 million.

Ford’s balance sheet, along with the Detroit’s other auto makers, has been hit hard by a drop in auto sales and oil’s soaring price over the summer. Ford's domestic auto sales tumbled 30% last month.

The Big Three auto makers have been looking for ways to bolter their balance sheets. Ford already sold its Jaguar and Land Rover brands to India's Tata Motors in March for $2.3 billion.  It is reported it is also looking to sell its Volvo Cars arm.

Monday, GM sold its remaining 3% it held in Suzuki Motor Corp for $232 million.

This morning on FOX Business, Mulally said the auto industry is in an unprecedented situation.  “We are in a perfect storm right now with the economy and the banks and the credit crisis.”  The company’s stock is down more than 70% in 2008.

Mulally, along with GM CEO Rick Wagoner and Chrysler head Robert Nardelli, is petitioning Congress to help secure a low-interest, $25 billion industry loan.

“The automobile industry is really important to the U.S. economy and I really believe we are part of the solution to our economic recovery,” Mullally told FOX Business.

White House spokeswoman Dana Perino reiterated the Bush administration’s opposition to using the $700 billion financial rescue package for auto makers, calling it "unnecessary and unreasonable."

Right now, the government only provides short-term loans to financial institutions through a myriad of newly created windows at the Federal Reserve.  The government has loosened its standards on what type of financial institutions it lends to, but lawmakers and the Bush administration remain hesitant to provide loans to non-financial companies.

Ford’s case hinges on convincing lawmakers that the ailing auto maker is an important driver of economic recovery. Also important is convincing Congress that American auto makers such as itself, General Motors (GM) and Chrysler, can even compete with the Asian auto makers, such as Toyota Motor (TM) and Honda Motor (HMC) that have a more robust cost structure.

“The automobile industry is really important to the U.S. economy and I really believe we are part of the solution to our economic recovery,” Mullally said.

--Adam Samson contributed to this article.