US President Barack Obama has given US carmakers General Motors (GM) and Chrysler strict deadlines to restructure before getting more aid. General Motors will be given 60 days and Chrysler just 30 days to submit new plans for recovery.
Soon after ordering the resignation of GM chief Rick Wagoner, Mr Obama said bankruptcy protection could speed up the restructuring process. But he also offered conditional assurances about the industry's future.
"We cannot, we must not and we will not let our auto industry simply vanish," said Mr Obama.
He said the car firms had run into trouble because of a "failure of leadership - from Washington to Detroit".
Restructuring plans may "mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger", he said. This could make it easier for the firms to "quickly clear away their old debts that are weighing them down so they can get back on their feet and on to a path of success".
Mr Obama said this would not have to involve breaking the companies up.
"My administration will offer GM and Chrysler a limited period of time with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars."
The president also said he would work with Congress on a programme to encourage consumers to replace old, less fuel-efficient cars with newer, cleaner vehicles. Germany and others have adopted such schemes, thus boosting vehicle sales.