Car giant General Motors (GM) has filed for bankruptcy protection, marking the biggest failure of an industrial company in US history.
The widely expected move comes after GM had seen its losses widen following a steep fall in sales in recent years.
The move into bankruptcy protection has been backed by the US government, which is now expected to take a 60% stake in the company.
The White House is also going to put another $30bn (£18.5bn) into GM.
President Barack Obama described the move as "tough" but said it was "also fair" and added it would "give this iconic American company a chance to rise again".
He said that the US government, which will own 60% of the carmaker, would be a "reluctant shareholder" and that he had no interest in running it.
As part of the plan, President Obama said that the share of GM cars sold in the US that had been made in the US would rise for the first time in 30 years.
Former GM worker Randy Sandusky talks about his worries over GM's bankruptcy and what this means for his pension.
GM, which had already received $20bn of emergency loans since the end of last year, said in its bankruptcy filing that its current debts total $173bn.
US Chapter 11 bankruptcy protection gives an American company time to restructure its finances while being protected from its creditors.
The restructuring will drastically change GM, with some 20,000 US workers thought likely to lose their jobs as the firm streamlines its operations. It currently has 173,000 employees across the US, Canada and Mexico.
GM announced on Monday that another nine plants will be closed while three more will go on standby, which means production will stop but the factories will be mothballed in case the company needs to expand its output again.
"I want you to know that what you're doing is making a sacrifice for the next generation - a sacrifice you may not have chose (sic) to make, but a sacrifice that you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things."
It is expected that GM may be able to exit bankruptcy protection in between 60 and 90 days.
GM's chief executive Fritz Henderson appealed to customers to give them another chance, saying "the GM that let too many of you down is now history".
He also offered "sincere thanks" to US and Canadian taxpayers who are funding the rescue of GM.
Its main European business, Opel, and its UK brand Vauxhall, will not be affected by the bankruptcy protection move. This is because their ownership has been transferred to a trust fund ahead of their sale, GM Europe confirmed in a statement.
GM chief executive on 'new General Motors'
Canadian car parts maker Magna International last week agreed to buy Opel and Vauxhall.
While the US government is set to take a 60% stake in GM, the Canadian government is due to own 12.5%, with GM's unions having 17.5%, and bondholders 10%.
Car industry analyst Gary Chaison, a professor of labour relations at Clark University, said the GM announcement marked the end of an era.
"It'll have a huge impact in the US because it's more than just a corporation - it's an icon," he added.
"It represented manufacturing supremacy and good jobs for American workers - that's gone."
GM is now the second of the "Big Three" US carmakers to enter bankruptcy protection, following Chrysler's lead.
Alastair Beveridge, a partner at restructuring specialists Zolfo Cooper, said it would now be interesting to see what happened at Ford, the other member of the big three.
US bankruptcy protection is called Chapter 11
It gives US businesses time to rearrange their finances while continuing to trade, protected from their creditors
"Ford has so far avoided going into bankruptcy protection, or even needing state support," he said.
"However, if its two main competitors have now taken this radical approach, it will be difficult for them to resist."
GM, once the largest company in the world, has been losing market share since the early 1980s.
It has been driven to bankruptcy by high production costs and the collapse in credit markets and consumer spending. It made losses of $30bn last year.
GM was also slow to move away from producing gas-guzzling SUVs when consumers were looking for more fuel-efficient vehicles.
Toyota sold more vehicles than GM in 2008, putting an end to the US company's 77-year reign as the world's biggest carmaker.
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