The Wheels Are Coming Off Everywhere

The stage set for Darling's pre-Budget package could not be more ominous, as Citigroup and the Detroit Three take the crunch into an even more horrible phase.

Once the world's biggest bank, Citi is on the brink after its market value plunged to $20.5bn on Friday, from $270bn two years ago. It would be a collapse that scarcely bears contemplating, dwarfing the likes of Lehman Brothers and our Northern Rock.

At the same time, America's largest car makers, General Motors, Ford and Chrysler, are warning that the industry faces meltdown without a government rescue package. But the credit squeeze is only partly to blame for their woes: it is bloated with executive excess, weighed down by huge pension and healthcare costs and has been slow to produce environmentally friendly vehicles. Former Republican presidential candidate Mitt Romney has a point when he says managed bankruptcy and restructuring would do the industry more long-term good than a bail-out.

The repercussions will be felt here: large layoffs at Citigroup in the UK are expected this week and there are worries about GM's Vauxhall plant at Ellesmere Port, which will suffer collateral damage if its parent goes under. Just when you think it couldn't get worse, it does.