GM outlines rescue plan

A WEEK after its shock profits warning, General Motors has mapped out the start of a turnround plan, saying it could ditch some of its weaker brands while overhauling its employees' healthcare provisions.

The world's largest carmaker also confirmed that it was in talks to sell a stake in its GMAC Commercial Mortgage unit, a move that could raise much-needed funds as some creditors have reined in their support for the embattled group.

Vice chairman Bob Lutz said that if some brands in GM's stable did not achieve sales projections the company would have to look at a phase-out. 'I hope we don't have to do that,' he said. Although Lutz did not identify which lines may get the axe, he described Buick and Pontiac as 'damaged brands' that had suffered from persistent under-investment.

'Let's not squander all our resources on trying to overcome negative momentum. Let's put the resources where we've got positive momentum, which is basically Cadillac, Hummer and GMC,' Lutz said at an industry conference.

GM has been losing market share in the US for years, but its blunt warning rocked investors as the Detroit company slashed its profit forecast for this year. Last week's announcement prompted ratings agencies to cut their outlook on its credit rating to negative, raising the prospect that the company's debt could soon attract a junk, or non-investment grade, tag.

Lutz, however, coupled his talk of shedding brands with a vow that the iconic group would survive, insisting that bankruptcy was 'absolutely out of the question'.

'Sure, we face short-term challenges, and this is not going to be a banner year,' he said.

'It's a difficult period of adjustment. But we will get through it.'

Lutz and Gary Cowger, GM's president for North America, said that reducing the company's healthcare burden could be part of a comprehensive recovery strategy. Lutz described the current structure as 'a huge albatross hanging over American industry'.

In separate remarks, Cowger said: 'An across-the-board competitive health care plan for salaried and hourly employees could literally save us billions.'

This week, General Electric said it would end a $2bn (£1bn) credit line for GM in June, six months ahead of schedule. The facility had been used by the group, which had about $300bn in debt, to pay its parts suppliers.

GM claimed a 25% share of car sales in the US during the first two months of the year, down from 27.5% for the whole of last year.