The US Government is considering the possibility of placing Chrysler and General Motors in Chapter 11 bankruptcy protection.
This would help safeguard the £11.7billion in loans extended to the carmakers, reports The Daily Telegraph.
It is understood the move is one of a range of options being considered by US Government advisers, and ensure taxpayers would be paid out first if either company collapsed.
Chapter 11 allows a company to undertake rigorous restructuring measures while protecting it from creditors.
However both carmakers have in the past said a move into Chapter 11 would be unhelpful, as customers would lose confidence and many suppliers would stop working with them.