The Detroit Three

It's hard to exaggerate the scale of the crisis facing the Detroit Three; in many ways, they are in a more parlous state than the banks. In 2000, the high-water mark for the industry, the combined stock market value of Ford and GM was more than $130bn. Today, you could pick up both for $10bn and still have change. Citigroup analysts estimate that the pair are carrying $69bn of debt between them. Since 2005, the companies have been haemorrhaging money: in the first half of this year they lost almost $30bn. Paul Newton, analyst from consultancy Global Insight, says: 'The big three are in severe trouble. The past couple of years have been a bloodbath.'

And how did they get themselves into this mess? More than any other incumbent car makers, they've been outwitted by nimbler, more efficient - and cheaper - foreign rivals. Twenty years ago, more than two-thirds of cars made in the US were manufactured by GM, Ford and Chrysler. This year, according to the Centre for Automotive Research, for the first time foreign car makers, led by Toyota, will overtake them.

The trio have also been hamstrung by the ruinous cost - estimated at $100bn - of providing healthcare for two million current and former workers. Last year, a landmark agreement with the UAW union capped these liabilities, but the damage had already been done.

That was not all. Soaring fuel prices have soured Americans' love affair with big, powerful 'sports utility vehicles' and boosted sales of smaller cars - more typically made by the big three's rivals. When the credit crunch took hold a year ago and property sales plummeted because of the shortage of credit, car loans also began to dry up. In response, the three companies have announced plans to close 35 plants, mostly in the area around Detroit, with the total loss of 100,000 jobs. GM and Ford are looking to expand operations in lower-cost places, such as Mexico, China and Africa.

But this restructuring, huge as it is, already looks hopelessly inadequate to stem their ballooning losses. With recession looming, credit, for the few people contemplating buying a new car in these straitened times, is even harder to come by. The financing arm of GM recently announced lending restrictions which, dealers estimate, would prevent almost two-thirds of would-be GM buyers from finding a loan, and Chrysler has made similar moves. Toyota plans to take advantage, according to Citigroup analysts, by offering interest-free loans on 11 models, which will only hasten the decline of the Detroit Three.

Citigroup predicts a 35 per cent sales slump overall in October compared with last year, with GM and Chrysler even worse hit as they withdraw credit. US car sales will pick up - most analysts predict a recovery in 2010 - but to what extent the big three will benefit is unclear. PWC estimated in September that they planned to cut production by about one million vehicles by 2012, but this may not be enough.