General Motors considers bankruptcy option

RICK Wagoner, chairman at General Motors, is preparing to gamble the car giant's long-term future by naming bankruptcy as one of the two options it will submit to the US government this week, according to local reports.

As car manufacturers race to draw up rescue plans by Tuesday, the deadline imposed by the government when it announced its $13.4bn car bailout, GM is understood to be weighing up two options: asking the Obama administration for a second rescue, or allowing the firm to file for bankruptcy.

Although the second option risks millions of jobs, analysts suggest it will enable GM to press ahead with critical cost-cutting plans which could ultimately seal the future of the Detroit car industry.

Analysts say neither option will be greeted with open arms by the US government, which is reluctant to give further handouts or see millions more jobs on the line as unemployment continues to soar.

Reports in the US said the Treasury department has calculated that GM will need at least another $5bn in aid if it is to continue to operate beyond March.

GM is locked in talks with unions and bondholders over a rescue plan but some sources close to the negotiations fear it could miss Tuesday's deadline.

Critics of the Obama administration suggest that progress has been delayed in the sector by his failure so far to appoint a "car tsar". This was one of the proposals set out in the bailout. Rival firm Chrysler is said to be "making progress" in its own talks with unions and creditors.