Buyers steer clear of GM vehicles

Nervousness by car buyers that General Motors may not be around long enough to honour its warranties has seen the firm lose £4 billion in the first quarter of the year.

As customers stayed away from showrooms, the US auto giant's chief financial officer Ray Young acknowledged the difficulty of climbing out of a steep decline even if the company cut costs.

He said: "Once you start losing revenue, you get yourself into a vicious circle in which you cannot recover."

The firm is on a June 1 government deadline to finish a restructuring plan as it makes do on £10.23 billion in federal loans. If this is not met, GM will be forced to join fellow US car maker Chrysler in Chapter 11 bankruptcy reorganisation.

Douglas Baird, a University of Chicago law professor who specialises in bankruptcy cases, said: "I think bankruptcy is highly likely, not because the losses are so bad, but because everyone has realised that this company needs fundamental restructuring."

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