The American car industry is nowhere near out of the woods. Even plugged with state aid from the Wall Street bailout fund, General Motors and Chrysler face a precarious few months as the carmakers wait for Barack Obama to take office on January 20, when he is expected to force through a long-term rescue plan for the near-bankrupt businesses.

Even though the American Government is poised to take a stake in General Motors and Chrysler and in turn inject emergency capital into the manufacturers so that they can meet their operating costs, Wall Street is seriously concerned about the state of the manufacturers’ underlying trading.

According to sales figures for November issued by the car companies, General Motors suffered a 41 per cent slide in new vehicle sales over the month, compared with a 26 per cent fall across the industry as a whole.

Such a steep decline in revenues is unsustainable, with the carmakers unable to cut production quickly enough to stay in line with collapsing demand.

New car sales have been hit in three ways. Demand for new vehicles collapsed some time ago with Americans cutting all discretionary spending and saving their funds for essentials such as food and petrol. However, after the collapse of Lehman Brothers in September, lenders withdrew unsecured credit facilities, and effectively stopped making car loans.

About 90 per cent of all new cars purchased in America are bought with car financing. As credit dried up, the car industry estimated that it would cost it six million new vehicles by the end of the year.

But, most critically, new car customers tend to be reluctant to buy vehicles from a company that may not survive long enough to meet obligations such as warranties and servicing agreements. Wall Street is also anxious that this month’s public bickering in Washington over the terms of a bailout would have kept buyers away.

Adding to the anxiety around the long-term viability of General Motors, the carmaker this week appointed a team of lawyers and bankers to advise the board on how it would apply for Chapter 11 bankruptcy protection.

Rick Wagoner, the chief executive, hinted during his testimonies to both the House of Representatives Financial Services Committee and to the Senate Banking Committee that should the carmaker enter Chapter 11, it might never reemerge because of the subsequent inevitable dive in car sales.

In their testimonies this month, Mr Wagoner and his counterparts at Chrysler and Ford, Robert Nardelli and Alan Mulally, gave warning that if one of the carmakers goes into Chapter 11, it would drag the other two with it. They have argued that the car companies are so intertwined that should one group fail, it would trigger the collapse of part of the car part supply base, and affect the other manufacturers.

A collapse of the Big Three could not come at a worse time for the US economy. The car industry employs about three million people across the country, but General Motors estimates that for every worker it employs, ten other people benefit either from dealerships, suppliers or, more widely, the industries that cater for the car industries’ vast production plants.

General unemployment is already rising at an alarming rate, with 6.7 per cent of the American workforce out of a job.

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