General Motors, the troubled US carmaker which owns Vauxhall in Britain, has not ruled out going to the government for a financial bail-out and has been in merger talks with local rival Chrysler, after its shares lost half their value last week.

The move comes as all three of America's largest auto manufacturers, including Ford, fight for survival in a financial crisis which has added to the woes of industrial companies already hit by plunging sales, rising costs and higher fuel prices.

Speculation about a bail-out intensified when Barron's, the respected US business publication, cited two unnamed sources with close knowledge of GM saying it had been talking about ways of seeking a low-cost loan from the US Federal Reserve to bolster its cash position.

Detroit, home city to the companies, has been awash with talk about how GM and Chrysler are looking at the kind of job and factory savings that could be made from welding together their two businesses.

GM insisted at the weekend that it had not yet gone cap in hand to the government and was not engaged in merger talks but Greg Martin, a spokesman for GM, added: "In this period of continued uncertainty in the markets, you really can't rule out anything."

The central bank, the White House and transportation officials have also declined to comment on the car company's crisis.

Leading credit rating agencies say GM has adequate money to see it through 2008, but 2009 could be difficult if business fundamentals deteriorate further. Robert Schulz, an analyst at Standard & Poor's, the rating agency, said car companies were running on empty, adding that "macro factors could overwhelm them at some point".

In response to mounting speculation, GM issued a formal statement saying it was "not considering bankruptcy," although it admitted it faced "unprecedented challenges" due to the financial uncertainty and weakening industry outlook.

Erich Merkle, an industry analyst and consultant at Crowe Horwath, said access to low-cost funds from the US central bank could stave off the risk of collapse. "I know GM has said 'no to bankruptcy', but the concern is that at some point they simply run out of cash and have no other option," he said.

In 1980, the US government provided $1.2bn in loan guarantees to Chrysler, a bail-out that enabled the company to turn round its fortunes. Chrysler is now owned by private equity house Cerberus Capital Management and while it has not commented on merger talks with GM, there are expectations that it would turn to Nissan or Renault if the US discussions did not bear fruit.