General Motors Corp. (NYSE:GM) is cutting costs, selling assets and chopping more jobs after reporting a third-quarter net loss of US$2.5 billion as the battered carmaker copes with one of the worst market downturns in the history of the North American auto sector.

The Detroit company also warned Friday it could run out of cash next year, and said it has suspended talks on acquiring Chrysler LLC, a move that could have led to the loss of thousands of jobs and plant shutdowns across North America.

The woes of GM, Ford and Chrysler, former iconic companies that dominated North American manufacturing decades ago, reflect the rapid slump in the U.S. economy and the credit crunch that has made it difficult for consumers to finance car purchases.

Hundreds of thousands of high-paying blue-collar assembly jobs have been shaved from the so-called Detroit Three since the late 1970s as GM, Ford and Chrysler lost market share to Japanese and European rivals.

At the same time, Toyota, Honda, Nissan and others have built plants and hired tens of thousands of workers in Canada and the U.S. as their business grows.

On Friday, GM announced it will further cut its white-collar workforce in the United States and Canada in a bid to save another $500 million in operating costs and improve the company's bottom line.

The company has 40,000 white collar workers in the two countries and announced plans this summer to cut about 6,000 of those jobs.

As well, the giant automaker is reducing capital spending to $4.8 billion next year from $7.2 billion as it delays some vehicle programs and makes other moves to pare its operating costs.

GM also said it has suspended talks to acquire Chrysler. While it didn't specifically name the automaker, GM said it was setting aside considerations for a "strategic acquisition."

"While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside," the company's said in a statement.

GM did not say how many jobs will be affected by its latest streamlining, but there's little doubt the moves will shave the company's workforce of 266,000 - including about 20,000 in Canada - to reflect a big loss in market share and the slumping U.S. economy.

Canadian assembly plants ship about 90 per cent of their output to the U.S. market so a drop in demand from U.S. consumers will impact jobs at auto factories across southern Ontario.

"Volatility in the world's financial markets, tightening of consumer and business credit and historically-low consumer confidence has created a very challenging environment," said Rick Wagoner, GM chairman and chief executive.

"Given the current lack of credit availability we must take further difficult 'self-help' actions."

In Canada, GM has already cut about 2,600 jobs with the planned shutdown of its pickup truck plant in Oshawa, Ont. by next fall, and another 1,400 jobs at the Windsor, Ont. transmission plant in 2010.

The latest GM cuts come hours after Ford Motor Co. (NYSE:F) said it lost $129 million for its third quarter and will cut about 2,260 more white-collar workers in North America as the industry tries to weather the worst economic downturn in decades.

In its financial report, GM said government aid is "essential" to help the U.S. auto industry through the downturn, which is expected to last until the economy recovers in 2010 or later.

"The third quarter was especially challenging for the auto industry," Wagoner said in the company's earnings release.

"Consumer spending, which represents close to 70 per cent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales. The U.S. government's actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy's and the auto industry's recovery, but further strong action is required."

Among its streamlining moves, GM is:

-Slowing down assembly line rates at North American factories beginning next year, but it gave no details.

-Delaying several new vehicle programs, but it would spend more on its Chevrolet Volt electric car and other fuel-efficiency vehicles.

-Targeting $10 billion in cash improvements through 2009.

-Selling between $2 billion and $4 billion of assets, including disposal of its Hummer, ACDelco and Strasbourg operations.

-Looking for new targets to save another $5 billion by the end of next year, bu cutting capital spending, reducing sales promotions, and further cutting production in the first quarter.

-Suspending its matching contribution for employee 401K plans - private retirement accounts - and suspending tuition reimbursement. In addition, salaried employees will not get incentive pay next year for their work in 2008.

-Seeking other cost reductions of $1.5 billion at North American operations and working capital improvements of $500 million.

-Increasing the cost reduction target for salaried workers to 30 per cent from 20 per cent as announced on July 15.

In its financial report, the biggest North American automaker said its quarterly revenue slumped 13 per cent to $37.9 billion, compared with $43.7 billion in the year-ago period.

GM said its net loss was $4.45 per share, compared with a massive year-ago loss of $42.5 billion or $75.12 a share, which was swollen by a $38.3-billion non-cash writedown of tax assets.

The automaker said it used up $6.9 billion in cash during the quarter.

The latest quarter included $1.5 billion in non-cash charges for commodity and currency hedging, and GM said it anticipates a soft U.S. market for the rest of this year and into 2009.

It also said emerging markets are beginning to show the impact of the global credit crisis, which has made it more difficult for consumers to finance car purchases.

GM released its results a day after Wagoner and the leaders of the other to big North American automakers, Ford and Chrysler, appealed in Washington for government loans.

GM shares were halted on the New York Stock Exchange pending news from the company. When they resumed, GM shares dropped 68 cents or 14 per cent to US$4.12.

At Ford, CEO Alan Mulally said the company has the right strategy to survive the troubles in the industry.

"While Ford has been dramatically affected by the difficult business environment, we remain absolutely convinced that we have the right plan and are taking the right actions to weather this difficult period and emerge as a lean, globally integrated company poised for long-term profitable growth," Mulally told industry analysts during a teleconference.