The heads of America’s three biggest car companies agreed yesterday to surrender their pay and perks and work for $1 a year in an attempt to convince the US taxpayer to bail out the country’s collapsed car industry.

Alan Mulally, the chief executive of Ford, Rick Wagoner, his counterpart at General Motors, and Robert Nardelli, the head of Chrysler, have offered to cut their annual pay to $1 (67p) and to sell their company jets in return for a bigger-than-expected $31 billion emergency bridging loan from Washington.

General Motors also startled Wall Street when it indicated that business has deteriorated far more rapidly than thought and claimed it would need much more cash to bail it out.

The car industry, which employs about three million people across the United States, is close to bust and yesterday the three carmakers submitted business plans to Washington to show how they planned to pay back the state aid. Their chief executives are to be questioned by Congress tomorrow and on Friday.

Last month General Motors said that trading was so dire it might run out of cash by the end of this year. But yesterday it admitted that its sales of new cars in the US had plunged by 41 per cent in November as Americans stopped spending on anything other than essentials, such as food and petrol, and banks withdrew car loans.

It also said it needed $18 billion in federal aid, $6 billion more than it said it required a few weeks ago. Mr Wagoner also gave warning that it needed $4 billion immediately to avert collapse before the end of the year.

Ford said that its car sales in America last month had sunk by almost a third but added that it would probably have enough cash for 2009, unless the economy went deeper into recession.

However, Mr Mulally and Mr Wagoner have not conceded their pay cuts readily. When both men first travelled to Capitol Hill last month to beg for federal aid, flying into Washington on their corporate jets, they declined calls for substantial salary reductions. The Ford boss earned $21 million last year and Mr Wagoner $14.4 million. Chrysler is a privately held company and does not disclose pay.

Yesterday, Mr Mulally and Mr Wagoner said that they would travel the 500-mile journey between Detroit, the home of the US car industry, and Washington by car for meetings this week. It was not clear whether they planned to drive themselves or employ chauffeurs.

Nancy Pelosi, the Speaker of the House, who controls Washington’s purse strings, told Ford, General Motors and Chrysler last month to submit business plans that would prove they could recover and repay a $25 billion loan, with interest.

Harry Reid, the Senate majority leader from Nevada, said yesterday that he planned to offer some sort of legislation for the car companies on Monday.

While Mr Mulally boasted that Ford was in better shape than GM and Chrysler, he said that he still needed a $9 billion ten-year federal loan to act as a cash cushion in case market conditions deteriorated. Despite forecasting that Ford would be profitable by 2011, in the small print in his 33-page document, Mr Mulally said that such a break-even target might not be feasible if one of a series of events happened. Those events included another US car company failing, sales of large sports utility vehicles (SUVs) continuing to decline, resistance from car unions to redundancies and benefit changes and America’s credit crisis deteriorating.

In its business plan, Ford said that it was trying to cut operating costs, was considering breaking itself up by selling Volvo and was investing in fuel-efficient cars. It said that it would cancel all bonuses paid to management across the world and to all employees in the US next year.

Mr Mulally said that Ford did not expect a liquidity crisis in 2009 “barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales”.

He added: “For Ford, government loans would serve as a critical back stop or safeguard against worsening conditions.”

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