United States President Barack Obama declared yesterday that General Motors and Chrysler restructuring plans were a little too late, leaving him no choice but to push out GM's chief executive and set a one-month deadline for Chrysler to merge with Italy's Fiat SpA.

Obama, who was stepping into the American industrial sector with a force not seen in generations, also raised the possibility of a controlled bankruptcy to help either or both companies to "restructure quickly and emerge stronger" - uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.

But Obama sought to soften the blow.

"What I am not talking about is a process where a company is broken up, sold off, and no longer exists," Obama said. "And what I am not talking about is having a company stuck in court for years, unable to get out."

As the United States economic recession deepened and the auto giants sought more taxpayer money, the president was performing radical surgery.

Underscoring the extent to which the government is now dictating terms to two of the country's iconic corporations - forcing the departure of Rick Wagoner as CEO of General Motors, Obama bluntly warned the administration may pull the plug on either or both companies.

The president acknowledged the pain being felt by Americans caught in the dizzying decline of the industry and blamed "a failure of leadership from Washington to Detroit that led our auto companies to this point".

However, Obama said his administration would try to encourage Americans to buy more US-made cars by offering some tax incentives to new buyers.

Obama stepped in after deciding General Motors Corp and Chrysler LLC had submitted unacceptable plans in return for billions more dollars they said was needed to stay in business.

The struggling companies were already being kept afloat with huge emergency government rescue loans. GM had received US$13.4 billion; Chrysler US$4 billion.

On Wall Street, uncertainty about the industry sent stocks tumbling.

By Monday afternoon, all the major indexes fell more than 3.5 per cent, including the Dow Jones industrial average.

More jobs in jeopardy

General Motors Corp plunged 76 cents, or 21 per cent, to US$2.86.

Chrysler is not publicly traded.

The president said the re-structuring plans submitted by the companies, which employ about 140,000 workers in the United States, did not merit continued taxpayer help and needed to do much more. Tens of thousands of more jobs could be in jeopardy in associated industries and businesses.

- AP