GM to cut a further 21,000 jobs

General Motors (GM) is to cut a further 21,000 US jobs this year and phase out its Pontiac brand, as it aims to meet a 1 June deadline to revamp its business.

GM has to complete its restructuring by that date to gain the extra multi-billion dollar government loans it needs to avoid bankruptcy protection.

The firm also said it hoped to halve its debts by persuading bondholders to swap $27bn (£19bn) of bonds for shares.

GM also wants the government to swap half its current loans for a 50% stake.

The government has so far given GM $15.4bn in loans.

Falling sales

GM said it also wants its main union, the United Auto Workers, to accept shares in the firm in exchange for cancelling 50% of the $20bn the firm must pay into a union-run healthcare trust. The carmaker said it would phase out the Pontiac brand by the end of the year in order to focus on four brands in the US - Chevrolet, Cadillac, Buick and GMC.

GM also said it would reduce the number of its US dealerships.

After all the proposed changes, existing GM shareholders would own only 1% of the firm.

GM has already cut 10,000 US jobs this year, announced in February. Following the completion of the latest 21,000 reductions, its American workforce will be reduced to 40,000.

'New path'

Like US rivals Ford and Chrysler, GM has seen sales fall sharply in its core home market in recent years, a decline that has intensified as the recession has continued.

The White House's car industry taskforce said it welcomed GM's latest announcements, but added that the government had yet to make a decision regarding the carmaker's proposal that it exchange half the current loans for a 50% stake in the firm.

"The interim plan that GM laid out in this filing reflects the work GM has done since 30 March to chart a new path to financial viability," it said in a statement.

"We will continue to work with GM's management as it refines and finalises this plan and with all of GM's stakeholders to help GM restructure consistent with the president's commitment to a strong, vibrant American auto industry."

Japan expects slump in economy

Japan says it expects its economy to shrink by 3.3% over the coming year - the country's worst slump in at least half a century.

The news comes as the government prepares to present a 15.4 trillion yen ($159bn; £109bn) economic stimulus plan to parliament.

The projected downturn for the 2009 fiscal year would be the worst since Tokyo began measuring growth in 1955.

It follows an estimated decline of 3.1% in 2008, the government said.

Finance Minister Kaoru Yosano said the world's second biggest economy remained vulnerable to fresh turmoil overseas.

"Exports have plunged much harder than our expectation," he said.

Government estimates of the decline have been revised radically downward, in what officials described as quickly changing conditions.

"The global economic crisis and economic downturn is increasing in severity, and Japan's export market is rapidly shrinking," the Cabinet Office said in a statement.