President Bush's eleventh-hour lifeline to America's stricken car industry came after he was faced with the blame for the collapse of the country's iconic and once mighty auto manufacturers.

Abandoning his longstanding objection to using part of the $700 billion Wall Street rescue fund to help save Ford, General Motors and Chrysler, Mr Bush appeared ready to reverse course after Republicans killed off the emergency car industry rescue package.

Ten hours later - and 20 minutes before the opening bell on Wall Street - Dana Perino, Mr Bush's press secretary, said in a statement that it would be "irresponsible" to let the car companies fail. She said Mr Bush would consider other options - including Wall Street's $700 billion Troubled Assets Relief Programme - "to prevent a collapse of troubled automakers."

Mr Bush had, until today, stubbornly insisted that the $700 billion Wall Street package was limited solely to stabilising the stricken financial sector and unclogging the credit markets.

Yet the collapse of the emergency car bailout, with no chance of it being revived before Barack Obama takes office in January, left the future of America's car industry - and with it the fate of up to three million jobs - squarely on Mr Bush's shoulders. He was facing intense pressure to act. Tonight, General Motors announced the closure of 21 factories across North America and the reduction of 250,000 cars from its manufacturing quota.

In the waning days of his presidency, he had a choice: do nothing, and risk seeing the manufacturers go bankrupt, or act unilaterally by allowing an injection of funds that would not need the approval of Congress.

Just how unpalatable Mr Bush found the idea of doing nothing, amid fears of how the collapse of the car industry would impact on an already reeling US economy, was summed up by Dick Cheney when he met Senate Republicans on Wednesday. If aid to the manufacturers was rejected, the Vice-president warned, it will be "Herbert Hoover time", a reference to the Great Depression.

Ms Perino added: "Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the weakened state of the US economy...a precipitous collapse of this industry would have a severe impact on our economy."

The $14 billion bailout appeared close to passage after marathon negotiations on Thursday, but finally collapsed because of the car union's refusal to impose wage cuts next year. The fight revealed a fascinating geographical split inside the Republican party, between Rustbelt senators representing the stricken Midwestern US car industry, and Southern senators, where foreign-owned car makers have built far more successful factories.

Mr Obama has made clear that he views the collapse of the car industry "unacceptable". If further funds are needed, he will likely prevail in passing rescue legislation next year because he will inherit a new Congress with a 58-seat Democratic majority in the Senate. Together with some Republicans, that should give him enough votes to override Republican objections.

Mr Obama has nevertheless been highly critical of the mismanagement of the US car industry. He has said that any emergency funds will only be provided with strict conditions, based on a major restructuring of the firms and a promise to make smaller, more fuel-efficient cars.

In a statement tonight, he again condemned the car industry's "bad practises", but added: "I also know that millions of American jobs rely directly or indirectly on a viable auto industry, and that the beginnings of reform are at hand."

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