General Motors (GM), the ailing car maker, has cut a deal with workers to slash its healthcare bill by $3 billion 2.4 billion) a year yesterday and laid out plans to sell a majority stake in its finance arm, estimated to be worth more than $20 billion.

GM said the healthcare cost savings would be complemented by another $2 billion of manufacturing and other cost cuts and $1 billion a year from reductions in its purchasing budget.

But Rick Wagoner, chairman and chief executive, warned that healthcare costs remained a major obstacle to the competitiveness of US manufacturing and called for reform of the US system.

Investors drove GM's shares 7.4 per cent higher to $30.05. Bonds issued by GM Acceptance, its finance business, soared on hopes that it could return to investment grade status under a new owner.

However, GM reported worse than expected results for the third quarter, recording a net loss of $1.6 billion as the North American division struggled with falling sales of its most profitable vehicles. The loss, against restated net income of $315 million last time, came as revenue rose 5.1 per cent to $47 billion.

The savings will also be partly offset by an agreement to contribute $3 billion to a fund for those affected by the healthcare cuts.

The agreement saves $1 billion a year of cash, with the rest of the $3 billion pretax cost saving coming from what analysts called an "accounting phenomenon".

GM is the largest private healthcare provider in the US, with 1.1 million workers, pensioners and dependants reliant on its healthcare payments and a cash bill it forecasts at $5.6 billion this year. Under the deal, which has to be ratified by the union, GM's liabilities for healthcare for pensioners, which stood at $77.5 billion at the start of the year, will be cut by $15 billion. The chairman, other executives and the white-collar workforce at GM, will have pay frozen and receive no bonuses this year.

Analysts said a majority stake in GM Acceptance was likely to sell for a discount to its book value of $25 billion because of its ties to the car maker.

Mr Wagoner said he hoped to find a partner who could help the finance business return to investment grade status after being downgraded to "junk" this year.- (Financial Times Service)