NEW YORK It was meant to be a new beginning for a venerable newspaper. The New York Times building, soaring 57 storeys above Manhattan`s 42nd Street, was heralded as the most significant addition to the city`s skyline for a decade.

When it opened in 2007 it was an ambitious statement of intent for the most famous journalistic brand in America. It would be a sleek and stylish new home for the best journalism in the world.

That was then. Now the “Grey Lady”, whose masthead bears the famed motto “All the news that`s fit to print”, could be staring into a financial abyss.

The US newspaper industry is in a disastrous state. Last year was a watershed jobs were shed in their thousands, newsrooms slashed costs and even some of the most illustrious names in the business - such as the company that owns the Los Angeles Times and Chicago Tribune - went bankrupt. On Friday it was announced that the Seattle Post-Intelligencer will be closed or go digital-only if no buyer for the 145-year-old title is found within 60 days.

Now, as the industry gears up for an even worse year, could its most renowned title be the next to fall?

Saddled with debts, crippled by the costs of the new building and of running one of the most expensive news operation on earth, some believe the Times is running on empty. It is facing all the same problems that other American newspapers are struggling with, as the internet steals subscribers and advertising dries up in the face of a deep recession. In a sign of the desperate financial straits in which the industry finds itself, the Times broke one of its oldest rules last Monday and put an advert on its hitherto sacrosanct front page. But the move only added to speculation about the future of the Times.

Some New York media commentators are beginning to contemplate the previously unthinkable could the New York Times go under? Certainly Michael Wolff, a media writer at Vanity Fair, thinks so. “There is no point of optimism here. There is no way that this situation gets better for them,” he said.

It is hard to overstate the place that the New York Times holds in American journalism. It is worshipped by media professionals as the home of true, old-fashioned reporting. Many look enviously at its lavishly funded foreign operations, its arts coverage and its investigations unit. Liberal America regards the paper as a bible, while conservatives love to hate it. But no one ignores the New York Times, least of all the people in power. Like the BBC`s Today programme in Britain, it is vital in shaping the news agenda of America each morning. “Losing the Times would be a blow to more than just American journalism; it would be a blow to American democracy,” said Jack Lule, a journalism professor at Lehigh University, Pennsylvania.

The latest bombshell to hit media circles in America was an article in the Atlantic Magazine by Michael Hirschorn that raised the prospect that the Times might default on debts of $400m by May. Hirschorn pointed out the Times earnings reports showed only $46m in cash reserves and no way to borrow, because its debt had been recently downgraded to junk status. “What if the New York Times goes out of business - like, this May?” Hirschorn asked.

It sent shock waves through much of Manhattan`s chattering classes, though Times executives say they will be fine. Times senior vice-president, Catherine Mathis, pointed out the debt was a revolving credit agreement. “We have been talking with lenders and, based on our conversations with them, we expect to get the financing to meet our obligations when they come due,” she said.

But whatever the details of the financial nitty-gritty, the Times is sailing in unexpectedly choppy seas and is starting to ship water. It is now in negotiations for a sale of the office space it owns in its grand new building. That is an embarrassment after the hoopla accompanying its move into its new base.

Others speculate that the Times - which is owned by the aristocratic Ochs-Sulzberger family, headed by publisher Arthur Sulzberger - will have to sell off other assets. It owns the Boston Globe and a stake in the Boston Red Sox baseball team. Either or both could be sold to raise some ready cash. But critics say such moves would be short-term and only signal the depth of the crisis, not the cure for it. “Let`s face it; they would be distress sales,” said Wolff.

Many believe that the idea of the Times collapsing is still fantastical. They point out that, if the worst comes to the worst, it would be sold. The Sulzbergers play the part of benevolent owners, keeping the paper`s journalism pure as a sort of political mission. But the large Sulzberger clan also relies on the Times company`s dividend as income. That has been slashed in recent years and, like many other grand old newspaper families before them, the Sulzbergers might be tempted to get out while they can. Possible buyers mooted include billionaire New York mayor Michael Bloomberg, internet giant Google and even deadly rival Rupert Murdoch. Times insiders, however, say the family has no intention of selling up. “The only way our ownership structure can be changed is if the Ochs-Sulzberger family decides to do so. They have said publicly that they do not wish to do so,” Mathis said.

But, whatever the ultimate loyalties of the Sulzbergers, the Times faces industry-wide changes that could swamp the best of intentions. Like other newspapers, the Times is facing the structural changes wreaked by the internet, where readers from Manhattan to Mumbai to Mongolia can read the newspaper free online. Like other papers, the Times has developed a huge web presence that has generated millions of readers. But the cost of the journalism that appears is still borne by the print edition, which is struggling. Put simply the business model of the Times - like every other newspaper - is rapidly ceasing to work.

In the Atlantic, Hirschorn suggested the future of the paper lay as a website, but with perhaps 80 per cent staffing cuts as the group seeks to become viable online only. But would a Times with only 20 per cent of the staff still be producing valuable journalism?

“The best journalists will survive and eventually thrive,” Hirschorn wrote, perhaps optimistically. Others baulk at such a vision, especially those at the Times. “The New York Times is in a better position than many others,” said Mathis. Yet that is a relative statement. The whole American newspaper industry is now very sick. The Fitch Ratings Service, which provides investment advice, brought out a report late last year on the American media. It included the prediction that by 2010 several cities would be adjusting to life with no daily newspaper.

Whether the New York Times is first to go or last to go, the damage to American public life is already looming large. “The weakening of civil life is already taking place. No one is repeating the maxim read your local newspaper, it`s your civic duty,” said Rick Edmonds, a media business analyst at the Poynter Institute in Florida. But while the shape of the future for the Times and other newspapers is unknown, the problems are clear. Take Jack Lule, the journalism professor. He used to pay a subscription for the Times and have it delivered to his home. Now he reads it free online. Just like people in Bogota, Berlin or Birmingham. “I guess I`m part of the problem,” he said. —Dawn/The Guardian News Service