GENERAL Motors Corp and Cerberus Capital Management have asked the US government for around US$10 billion in an unprecedented rescue package to support a merger between GM and Chrysler LLC, insiders said on Monday.

The government funding would include roughly US$3 billion in exchange for preferred stock in a merged car maker, according to one insider.

The US Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources said earlier on Monday.

GM has been in talks with Cerberus about buying Chrysler since last month but the discussions have been snagged by difficulty in securing investment or financing for a deal at a time when credit is tight and global auto sales are in rapid retreat.

A decision by the Bush administration to provide the government's first funding for the auto sector since the US$1.5-billion bailout of Chrysler in 1980 has been widely seen as the merger's best chance for success. 'The auto makers are facing a maelstrom and that's why I think an unprecedented government infusion could happen,' said Efraim Levy, an automotive equity analyst with S&P.

An injection of US$3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top US auto maker.

It would also give US taxpayers a large stake in the turnaround of a struggling auto industry that employs over 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts see GM, Chrysler and rival Ford Motor having been driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

Now, in addition to taking a stake in what would be the world's largest auto maker by volume, the US government is also being asked to provide support by taking over some US$3 billion in pension obligations.