New York, November 21:

What began as a whisper on Wall Street became a deafening roar at the end of last week. Could General Motors (GM), the largest carmaker in the world and the backbone of American industry, be preparing to file for bankruptcy?

Shares in the company skidded to their lowest level since 1987 amid fears for its future. The firm is in a quagmire; partly of its own making, partly due to the challenges of globalisation, but a mess nonetheless that GM is sinking into fast. The company has lost almost $4 billion so far this year. It now has a market capitalisation of $12 billion. By comparison, the market values Wal-Mart at $204 billion and Google at $112 billion.

If GM were forced into bankruptcy it would be a deep psychological blow for the US. It wou-ld also help to redefine the already shifting expectations of ordinary working Americans: the decent heal-thcare, wages and pensions that GM and its rivals in the Detroit car industry pioneered are likely to fade into memory. As GM and Ford suffer, so do suppliers. Mic-higan and the surrounding states that rely on the car industry have already seen thousands of job losses and slashed wages.

The speculation had gathered enough momentum at the end of last week for Rick Wagoner, chairman and chief executive, to send a highly unusual letter to staff, “I’d like to just set the record straight here and now,” he wrote, “There is absolutely strategy or intention for GM to file for bankruptcy.” The comments gave the shares a brief fillip — they rose by four per cent — but Wall Street remains jittery. Bank of America recently raised the odds on GM filing for bankruptcy in the next two years to 40 per cent.

The biggest problem is in the company’s core north American division. In the most recent quarter, the carmaker narrowed its losses in Europe to $105 million from $236 million a year earlier. In the US, it lost $1.6 billion. Amid intensifying competition from Asia, GM’s market share in the US has fallen to 25.6 per cent from 28.5 per cent a year ago. Wagoner, in charge since 2000, is looking increasingly vulnerable. Kevin Tynan, an analyst with Argus Research, said, “If there is a continued dip in US market share, board members will have to say enough is eno-ugh. Even though it is not completely Wagoner’s fault, you just have to shake things up.” In the US, GM has fou-nd it difficult to wean buyers off the profit-eroding incentive deals it first introduced to get sales moving after the 2001 terrorist attacks. Without incentives October sales dropped by 23 per cent.

The company has also been heavily reliant on the sport utility vehicles that generated much of its profits in the 1990s. As petrol prices have risen, sales of the gas-guzzlers have plummeted. In the meantime, GM has been slow to invest in the petrol and electric hybrids that are becoming increasingly popular. GM’s biggest difficulty is the soaring cost of pension and healthcare liabilities for workers and retirees in the US, which add $3,500 to the price of each vehicle. Uni-ons fear that under bankruptcy, GM could cancel worker contracts to sharply

reduce its liabilities.