The US Supreme Court has lifted a temporary hold on the sale of Chrysler to Italy’s Fiat in a move that will take the Detroit company out of bankruptcy in a government-backed restructuring.

The restraining order was imposed by the court earlier this week so it could give itself more time to consider appeals filed by several Indiana pension funds and a coalition of consumer groups.

The bulk of Chrysler's assets can now be transferred to Fiat, which is set to gain a stake in the company through a fast-paced bankruptcy process brokered by the US and Canadian governments.

The US Supreme Court has stayed at the 11th hour the asset sale Chrysler planned to make to a group led by Italian carmaker Fiat.

The court is reviewing a decision by a bankruptcy judge and a federal appeals court.

Ahead of the decision, Chrysler and the federal government warned such an intervention might lead to liquidation. But the high court, in a brief order, said it would extend a temporary stay put in place by an appeals court until it has the chance to receive and review routine appeals from groups opposed to the sale.

General Motors revealed it had clocked up nearly $US180 billion in debt as it filed for bankruptcy protection in the US with a government-backed plan to create a 21st-century company that can compete in world markets.

“GM’s and its stakeholders have achieved a viable, achievable plan that will give this iconic American company a chance to rise again,” US President Barack Obama said when announcing the move.

Ambitious plans by Italian carmaker Fiat to become the largest in the sector after Toyota face a bumpy ride.

Fiat is planning to acquire both America’s Chrysler, which is in Chapter 11 bankruptcy, and the European operations of troubled General Motors, including the Opel, Vauxhall and Saab marques.

But the plan has hit obstacles in Germany where the government has issued a string of conditions for any Opel buyer.

Stocks on Wall Street slid into negative territory at the close after surging 1.7% during a choppy day's trading.

Sentiment was set by Exxon Mobil's profit drop, which drove energy companies lower, and the government's decision to push Chrysler into bankruptcy.

The Dow Jones Industrial Average finished 17.61 points down at 8168.12 while the S&P 500 was  virtually unchanged at 872.8, 9.4% gain for the month.

(9.30am market close) Turmoil in the auto industry and continued worry about the financial sector hammered stocks on Wall Street, further eroding the market's upswing of recent weeks.

The Dow Jones Industrial Average fell 254.16 points, or 3.3%, to 7522.02. All of its components declined. GM shares shed 25% to their lowest levels in decades.