An ideological battle has erupted between George Bush and Barack Obama, with the outgoing President baulking at proposals to prop up General Motors, once the world's largest car maker, which could go bust by Christmas.

Despite the smiles for the cameras at the White House on Monday, a tense stand-off is flaring between the two. It is testing Mr Obama's assertion that "we only have one president at a time" and his desire to stay out of Mr Bush's way in the remaining two and a half months of his presidency. With car sales collapsing in a steadily worsening economy, the President-elect wants to avoid the prospect of tens of thousands of Democrat-voting union workers being thrown out of work just as he starts his term of office.

According to one account of their Oval Office discussions, Mr Obama asked Mr Bush to use some of the billions of dollars in the financial bailout package to prop up the car industry. Economists are already warning that if GM goes broke it could bring down the rest of the economy and tip the world into a much-feared depression.

Mr Bush seems determined to play hardball by refusing the car industry access to any of the $700bn (£450bn) financial rescue package agreed by Congress, say sources quoted by The New York Times and Associated Press. Hand-over meetings between incoming and outgoing presidents are traditionally confidential and Mr Bush was reported to be furious over leaks from the Obama camp, perceived as undermining his remaining days in office.

As Mr Bush sees it, he has one last opportunity to secure a legacy as a champion of free trade, and he reportedly tied the Democrat's request for billions of taxpayer dollars for the failing car industry to a controversial trade deal with Colombia. The White House denied Mr Bush had suggested a "quid pro quo" but confirmed that he had spoken about the "merits of free trade".

Mr Obama has already voted to block the Colombia deal in the Senate because of widespread human rights abuses against union workers. He seems ready to call Mr Bush's bluff, calculating that the outgoing President is so unpopular that he will buckle rather than be accused of driving a stake through the heart of an iconic, century-old American company.

GM has watched helplessly as US consumers stop buying gas-guzzling Cadillacs, Hummers and Chevrolet pick-ups in favour of hybrid and other more fuel-efficient vehicles. With no money coming in, the company has burnt through cash reserves so quickly that its share price yesterday fell below $3 for the first time since 1943 and Wall Street analysts have started to predict that shares in the company could actually be worthless.

Last week, Mr Obama called the car sector "the backbone of American manufacturing". The three big makers, GM, Ford and Chrysler, have operations across America and if they collapse, it would devastate the economy. The estimates are that three million jobs would be lost, counting the car-workers, their suppliers and even the hot-dog sellers outside the factories.

Even Mr Obama's generosity towards the car companies has its limits. As part of his energy and environmental plans being drafted with the help of Al Gore, he wants to ensure taxpayers' money is spent wisely in a way that helps reduce dependence on imported oil and fights climate change. He asked Mr Bush to quickly release $25bn which has already been agreed to help companies retool to make more fuel-efficient cars. Mr Gore is advising that "we should help America's automotive industry to convert quickly to plug-in hybrids that can run off renewable energy that will be available".

Car companies have lobbied hard to block higher fuel-efficiency standards which average 17 miles per gallon. The big three say they need immediate unrestricted access to cash just to meet their wage and supplier bills. The Michigan-based Centre for Automotive Research has warned that the price of their failure would reach as much as $156bn in lost taxes and extra costs of health care and unemployment assistance.

Another problem Mr Bush and Mr Obama now face is that the bailed-out financial companies have come back for more money. On top of that, the country's credit-card industry is grinding to a halt. Even American Express has its hand out for taxpayer money. This week, it joined commercial banks and became eligible for rescue funds. The credit-card giant is in danger of collapse because millions of Americans have failed to repay debts run up to fund consumer-driven lifestyles.

The Bush administration has spent all but $60bn of the first half of the bailout funds and only this week had to cough up more money for the insurance giant, AIG.

Belfast Telegraph