A proposed $14bn government bailout for the US auto industry collapsed in the senate last week after politicians and unions failed to agree on its terms and conditions.
Unions have warned that bankruptcy would put thousands of workers jobs at risk and harm the already struggling US economy, which George Bush, the US president, said this earlier this month had entered a recession.
US vehicle sales dropped 37 per cent in November amid the worsening economic crisis and General Motors and Chrysler are believed to be on the brink of collapse.
The firms have been criticised for not responding to markets needs and producing more fuel efficient vehicles.
Bush told the American Enterprise Institute, a conservative Washington policy group, on Thursday that he had not decided what he would do about the auto firms.
“Under normal circumstances, [there is] no question bankruptcy court is the best way to work through credit and debt and restructuring,” he said.
“These aren’t normal circumstances. That’s the problem.”
On Wednesday, Chrysler also said it was suspending manufacturing for at least one month as it struggles amid the economic slowdown and poor sales.