Page last updated at 17:23 GMT, Thursday, 7 May 2009 18:23 UK

Sales slump doubles losses at GM

GM headquarters in Detroit
GM has a 1 June deadline to come up with a restructuring plan.

Troubled US carmaker General Motors has announced a loss of $6bn (£3.98bn) for the first three months of this year as a massive slump in sales hit revenues.

The loss is almost double the $3.3bn loss recorded a year earlier, while revenue of $22.4bn is almost half that posted in the first quarter of 2008.

The company also said it burned through $10.2bn of cash in its attempts to stave of bankruptcy.

The carmaker has taken billions of dollars in aid from the US government.

'Vicious circle'

GM has a 1 June deadline to come up with a restructuring plan. If it fails to do so it will be forced to file for bankruptcy protection.

We increasingly believe GM may emerge substantially stronger from a bankruptcy - provided the process is not overly drawn out
Himanshu Patel of JP Morgan Chase

The firm said that during the first three months of the year it cut global production by more than 900,000 vehicles, or 40%, as it tried to reduce both costs and inventories.

"We're focusing very much on the cost side of the business but once you start losing revenues you get into a vicious circle from which you can't recover," said GM's chief financial offer Ray Young.

GM has so far been given more than $15bn of US government loans.

Mr Young added that if GM needs to go into bankruptcy protection, "it is an imperative for us to go in and out quickly".

Car industry analyst Himanshu Patel of JP Morgan Chase said the likelihood of GM going into bankruptcy protection was between 60-80%.

"While the GM equity today is largely un-investable, we increasingly believe GM may emerge substantially stronger from a bankruptcy - provided the process is not overly drawn out," he added.



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