Henry Paulson, the US Treasury Secretary who has less than three months left in office, said that Congress should devise its own bail-out for America's collapsing car companies and leave his $700 billion rescue package alone.

Mr Paulson reiterated that the Treasury's Troubled Asset Relief Programme was not the suitable vehicle to rescue General Motors, Ford and Chrysler from collapse, adding that his scheme is only designed to throw a lifeline to banks.

Speaking in a television interview yesterday, the former chief executive of Goldman Sachs said: "Congress should address the question of the auto industry. I encourage Congress to come up with a pot, to get money to deal with this issue."

He added that he was in support of trying to help America's car makers which between them provide around 3 million jobs across the US.

Mr Paulson appears to be struggling to cope with pressure from Barack Obama, the new President Elect and leading Democrats such as Nancy Pelsoi, the House Speaker, who are pushing for a federal bail-out of the car companies. Only a month ago, the car manufacturers approached Mr Paulson and asked for rescue funds, and to be bailed out in the same way that Wall Street banks had experienced. Mr Paulson refused them, making it clear that the Treasury's role was to address the underlying problems of the credit crisis, namely liquidity, rather than use taxpayer money to prop up failing industries.

Fears for the future of the US carmakers grew yesterday when Chrysler warned it could not survive without government cash and Goldman Sachs suspended its rating on General Motors, warning that it needed $22 billion to survive the industry downturn.

Bob Nardelli, Chrysler’s chief executive, said that the US companies needed cash and also needed to cut costs by sharing production and sourcing arrangements. He said: “We have no alternative. I think it’s going to take creative, bold new thinking.” Last week GM said that merger talks between it and Chrysler had been abandoned as GM wanted to concentrate on bolstering its own finances first. Chrysler’s owner Cerberus is thought to have also had talks with Renault-Nissan and Hyundai.

Goldman Sachs thought GM had enough cash to make it through to the end of the year but JP Morgan said it believed that the carmaker needed “something immediately”.

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