Barack Obama yesterday condemned “a failure of leadership” from Washington to Detroit for the decline of the US car industry and demanded new sacrifices from debtholders, unions and executives at General Motors and Chrysler in return for fresh bail-out money.

The US president, adopting a more interventionist approach, yesterday announced tax incentives for new car purchases and said he would support so-called “cash for clunkers” legislation, which has stimulated the German car market with incentives to trade in old cars.

But Mr Obama said that his auto taskforce, which was set up to study the companies' request for an additional $21.6bn of government funds, had decided that neither of them had gone far enough in cutting debt or benefits to workers and that no money would be given without more fundamental reform.