LONDON, Dec 14 (Reuters) - The British government is set to unveil a limited aid package for beleaguered car manufacturers this week in a bid to prevent thousands of potential job losses, a British Sunday newspaper said.

Business Secretary Lord Peter Mandelson is expected to make loan guarantees available to the finance arms of car companies to kick-start lacklustre sales, according to a report in the Sunday Times. Another option under consideration is to make low cost loans to the industry from the 400 billion pounds ($892 billion) earmarked to help banks, the newspaper said.

Industry leaders have been calling for measures to stimulate demand for more than six weeks but now say they will not be enough to keep factories running, the report said.

A spokesman for the Department for Business, Enterprise & Regulatory Reform declined to confirm the report, but said the department was monitoring the industry situation closely.

"Ministers have said they will do all they can to help," he said.

In a separate report, the Observer newspaper quoted the joint general secretary of Britain's Unite trade union, Tony Woodley, as saying up to 40,000 car industry jobs could go in the next four weeks unless the government intervenes.