General Motors and Chrysler were given deadline extensions this week from the US Government to attempt to secure their futures.

Chrysler has been allowed until the end of April to seal a merger with Fiat or another carmaker to gain $6 billion extra aid. Otherwise it will get no state help, and may have to go bankrupt as the state does not regard Chrysler as a viable standalone company.

And after the US Government demanded the resignation of GM chief executive Rick Wagoner, it was granted until the end of May to come up with a survival plan.

US officials believe both carmakers could still require a short period of Chapter 11 bankruptcy, which would enable them to shed some debt to become leaner, profitable businesses.

President Obama blamed the decline of the US car industry on poor leadership “from Washington to Detroit” and said problems had been papered over as foreign competitors outpaced US manufacturers. 

The deadline extensions follow the failure by both carmakers to produce satisfactory restructure plans by March 31 – a condition of the US aid they have already received.

Obama said the issue was the failure of some of the carmakers’ creditors to reduce their debts.

To reassure consumers, the US Government plans to guarantee warranties on new cars from GM and Chrysler from now until they return to good health.

Just hours after the measures were announced in the US, the head of GM Europe (GME), Carl-Peter Forster, was due to meet German Chancellor Angela Merkel to discuss its request for £3 billion of financial aid for its European brands.