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Shares in General Motors collapsed this week to their lowest level in 50 years when a leading bank said the car giant could become bankrupt.
John Murphy, a leading analyst at Merrill Lynch, said: "Bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not raised."
The share price closed at $9.98 on Wednesday, compared with a high of $93.60 in April 2000.
A GM spokesperson said: "We continue to believe the company has sufficient liquidity for 2008 despite lower volumes," although city analysts believe the company may need to raise as much as $7.5bn during the ongoing credit crunch to see out the current downturn in car sales.
In America, large companies can continue to trade under the protection of Chapter 11 bankruptcy. Several airlines are currently under Chapter 11 protection, and Boeing has been in the past. GM was reported to have come very close to entering Chapter 11 bankruptcy in 2005.
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