GM, Ford, Chrysler: a nationalisation too far?

It's not only America's banks that are in meltdown. Share prices in US car makers have plummeted. We could see the merger of GM and Ford - and the detonation of a pension timebomb that forces the US government, against all its instincts, into financing health care.

When General Motors' shares hit $4.65 recently, the world's second-biggest car manufacturer had a market capitalisation lower than it was in 1929. Ford's shares have fallen by 80 per cent, hence the rumours of a merger. Chrysler's prospects now look unhealthier than a Thanksgiving turkey's.

The Big Three have been brought low not simply by their incorrigible persistence in making lousy cars that nobody wants to buy. They are also financially overburdened with insupportable obligations for their employees' health and pension policies.

GM's welfare commitments add up to $170bn. A top GM executive has described the corporation as "the biggest health-care company in America." GM has claimed that these obligations are "fully-funded" by investments. But the bulk of those investments are on Wall Street, from which income is evaporating.

Will the federal government allow the car giants to go bankrupt or will President Bush nationalise GM and the others the way Gordon Brown has nationalised the banks? Such a move would amount to outright state capitalism. An alternative - probably no less politically palatable - would be for the federal government to assume the car companies' liabilities for pensions and health-care.

If that happened, the staggering consequence would be that - after decades of adamant resistance to the notion - the US taxpayer would effectively be financing a national health service and a state pensions system.

But this last-ditch remedy might provide the companies with their only possible lifeline to pull through to 2009 - when car sales are forecast to be their lowest ever. ·