Washington  - The US is carrying out a major family shake-up in the debt-ridden US car industry, demanding a new head-of-household for General Motors and a forced marriage between Chrysler and Italian carmaker Fiat, according to reports late Sunday in various media.

   The interventions, which could also include bankruptcy, are to be formally announced Monday at 1500 GMT by US President Barack Obama on the eve of his departure for three major diplomatic offensives in Europe.

   GM head Rick Wagoner, who has held the post since 2000 as the US auto industry steadily lost ground to Asian rivals, has agreed to step down as part of the government's condition to continue helping the country's largest car maker, the Detroit Free Press and other newspapers reported, citing unnamed officials.

   GM, which has not confirmed the reports, would be given 60 more days to restructure without Wagoner, the Free Press reported.

   The plans are outlined in a memo from the government's auto task force which is overseeing 17.4 billion dollars in loans to the largest and third-largest US car makers.

   Obama is expected to lay out the details of what the government wants the companies to do before they get any more money from the government. They are asking for another 20 billion dollars or so.

   The task force memo suggests that a "quick surgical" bankruptcy may be the best chance for both companies to survive.

   In the memo, Chrysler LLC comes under special fire for its outmoded factories, failure to produce fuel efficient engines, lack of quality and other shortcomings. Chrysler's viability plans submitted to the government some weeks ago were "overly optimistic" and "unrealistic," the Wall Street Journal quotes the memo as saying.

   The only thing to save Chrysler, the task force suggests, is to finalize long-reported discussions about a partnership with Fiat. The government would be willing to give Chrysler 30 days of working capital to finalize the deal.

   Only then would it consider the 6 billion dollars in added loans Chrysler is seeking, according to the memo. Chrysler has already received 4 billion dollars in federal loans, and was to map out a plan for viability to qualify for more money.

   The government was to respond by Tuesday to plans submitted some weeks ago, but with Obama departing on a major diplomatic trip on the deadline day, it appeared the White House's decisions were to be released a day early.

   The task force said the debt reductions and concessions outlined by Chrysler were not sufficient, the Journal reported. Chrysler would have to "extinguish" the vast majority of its "outstanding secured debt and all of its unsecured debt and equity."

   Another shortcoming for Chrysler was its heavy a dependence on the North American market, according to the memo. The Fiat partnership would give Chrysler the Italian car maker's experience with fuel-efficient technologies.

   Chrysler's smaller size also makes it difficult for a profitable return on research and development, the auto task force said.

   The task force rejected an earlier proposal under which Fiat would provide some technology in exchange for a 35 per cent stake in Chrysler. It said that would allow Fiat to jump ahead of US taxpayers in harvesting a possible payback down the road.

   For both companies, "structured bankruptcy ... would be a tool to make it easier for (them) to clear away old liabilities so they can get on a path to success," the memo was quoted as saying.

   Obama has said he is determined to see the US motor industry become successful, but has not ruled out bankruptcy as an option. The US car industry has seen sales plummet more than 35 per cent amid the country's worst recession in decades.

GM has already received 13.5 billion dollars and Chrysler 4 billion dollars in emergency loans. Ford Motor Co, the country's second largest producer, has not taken any bail-out money.

   Wagoner, 56, has had a tumultuous time at GM. The company has lost more than 80 billion dollars in the last four years as Asian competitors steadily made inroads into the once-dominant US car industry. GM last year lost its title as world's largest carmaker to Japan's Toyota Motor Corp.

    "Everybody's going to have to come to the table and say it's important for us ... to take serious restructuring steps now in order to preserve a brighter future down the road," Obama said in an interview broadcast Sunday on CBS.

   While much of the US industry's woes have been blamed on a failure to adapt to a changing market, Obama noted that the US market for new cars has dropped from about 14 million to 9 million in 2008 as consumer demand tumbled across the country.

   "Everybody is having problems, even Toyota and other very profitable companies," the president said. Toyota posted its first-ever annual loss in 2008, largely on plummeting US sales.

   Obama was optimistic that the country can have a "successful US auto industry."

   "But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is," he said.

   Obama said everyone must be willing to sacrifice, including management, labour, shareholders, creditors, suppliers and dealers.

   As a possible successor to Wagoner at GM, Frederick "Fritz" Henderson, GM's chief operating officer, is seen as the likely candidate to take over, The New York Times reported.