Chrysler is to idle all manufacturing operations in the US, Canada and Mexico from 19 December to 19 January, citing "the continued lack of consumer credit for the American car buyer and the resulting dramatic impact it has had on overall industry sales in the United States".

"In doing so, the company will keep production and dealer inventory aligned with US market demand," it said in a statement.

Chrysler said dealers have said they have many willing buyers for vehicles but are unable to close the deals, due to lack of financing.

"The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation," Chrysler said.

Dow Jones reported that Chrysler's financing arm had warned dealers it may have to temporarily halt loans they use to stock vehicles as a result of a recent wave of withdrawals from a fund used to pay off those loans.

Chrysler Financial CEO Tom Gilman said dealers have been withdrawing up to US$60m a day from the fund and $1.5bn since July, according to a copy of a letter dated 12 December seen by the Wall Street Journal.

Suspending loans for purchasing new vehicle stocks would mean dealers wouldn't be able to order cars and Chrysler's revenue could plunge since automakers book car sales when the vehicles are shipped from plants to dealers.

Cash-strapped Chrysler has said it needs $7bn in loans to make it into the first quarter.

A Reuters report said the 30,000-plus union workers at the US factories would receive nearly full wages and benefits during the shutdown and that the move would put new pressure on the Bush administration to quickly help cash-strapped automakers.

There were reports last night that GM and Chrysler have restarted merger talks.

The White House would not comment to the news agency on the Chrysler plant closings. But leading Senate Democrats who have pressed for assistance told Reuters the decision to stop work even temporarily demonstrated that intervention cannot wait any longer.

"This administration must act now," Michigan Democrat senator Debbie Stabenow said in a statement. "I once again call upon the president to use his authority and provide a bridge-loan to our automakers."

Democratic lawmakers and industry sources have said that any emergency assistance would likely cover GM and privately held Chrysler and total up to US$14bn.