Honda yesterday became the first car manufacturer in Britain to extend production cuts into next year after it increased the scale of its reductions.

The British operation of Japan's second-biggest carmaker will cut production by another 10,000 vehicles, extending short-time working through to March. Previously it had set out plans to cut its output by 22,000.

This year Honda had planned to produce 228,000 cars at its factory near Swindon, where it makes the Civic and the CR-V four-wheel drive. Honda said that it did not plan to cut jobs among the 4,800 workforce there.

Honda's move follows a series of production cuts across most of Britain's car industry and comes as automotive chiefs acknowledged that the slowdown may hit global operations much harder than had been feared.

Carlos Ghosn, chief executive of Renault-Nissan, gave warning yesterday that the industry was in “uncharted territory”. He said: “This is not going to be a short-term crisis. I don't think we'll get out next year, or even in 2010.”

Nissan's operation in the UK is on short-time working and the company has cut 1,800 jobs in Spain.

PricewaterhouseCoopers said that the credit crunch had entered a new stage and that growth in the automotive market was unlikely until 2010. The accountant significantly revised down its forecast for Europe after the worsening economic situation.

Carmakers are expected to use the traditional Christmas shutdown period to cut production further by keeping factories closed for longer. Honda will halt production from December 18 to January 6. Vauxhall's car factory at Ellesmere Port on Merseyside and its van plant at Luton will be shut from December 17 to January 3. In Germany, Daimler will close its 14 car factories for four weeks in December. Suppliers are also following suit with moves by GKN, Bosch and Continental Tyres to cut production.

Meanwhile, speculation in the US mounted that a merger of General Motors and Chrysler could be enabled if the US Government delivers $10 billion (£6.4 billion) in support. It is thought that the GM has asked the Government for the money, for which the State would have a stake of about $3 billion in the merged group.

Although the US Government has established a $25 billion fund for struggling carmakers to invest in green technologies, it has not made a direct investment in a car company since 1980, when Chrysler was bailed out.

The US Treasury is thought to be considering the request for cash. Efraim Levy, an analyst with Standard & Poor's, said: “The automakers are facing a maelstrom and that's why I think an unprecedented government infusion could happen.”

The talks between GM and Chrysler, which is owned by Cerberus, the private equity group, have been forced because both companies are struggling badly in the face of dire markets and a lack of credit.

Separately, Ford announced an investment in its UK engine plant at Bridgend. The company is investing £70 million to enable the factory in mid-Glamorgan to produce a new generation of low-emissions petrol engines. The cash, which includes £13.4 million from the Welsh Assembly, will increase the plant's capacity to nearly one million engines a year.

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