General Motors is preparing another round of restructuring to replace its costly, older workers with cheaper employees as the American economy hovers on the brink of a recession.

America's biggest car company said at a conference in Detroit that it was about to make further moves to reduce its US cost base by $5 billion (£2.6 billion) a year by 2011.

The auto group is negotiating with the United Auto Workers (UAW) union for phase two of its employee buyout programme, which begins next month. About 46,000 employees are eligible for retirement, and those opting for the buyout in the February phase will leave in April.

In September, General Motors secured a ground-breaking deal with the UAW to hive off the company's $51 billion worth of medical insurance liabilities into a separate trust.

GM also agreed to pay existing workers an annual bonus of at least 3 per cent of their salaries as part of a four-year pay deal. In return, the union, which represents 73,000 GM workers, agreed to a number of redundancies. These jobs will be filled by new workers paid at much lower rates.

The costs of healthcare benefits have sapped the car manufacturer's ability to fight leaner car groups such as Toyota, which has overtaken all its rivals to become the biggest car group in the world.

GM believes that, with the early retirement programme, the healthcare trust and less onerous labour contracts, it can reduce costs on American hourly workers, pensions and healthcare from an average of $7 billion a year over the last 15 years to about $1billion a year from 2010.

During the third quarter of 2007 the car group admitted to the biggest loss in its history, plunging into the red by $39 billion.

GM has the oldest workforce in American car manufacturing and is thought to be trying to encourage its older workers to take early retirement. Wage and pension costs for the group are substantial. According to Ross Eisenbrey, of Washington's Economic Policy Institute, GM carries about 3.5 retired workers for every active worker.

Separately, at the end of last week, Rick Wagoner, GM's chief executive, expressed frustration that the company's sales network was not shrinking fast enough. He said that the group was preparing to accelerate the rate at which its dealerships were consolidating.

Mr Wagoner said that car group was planning to merge its dealerships with those of Pontiac and Buick in one sales channel, in an attempt to cut costs.

He said: “It's time to do that, and the payoff is significant.”

General Motors' Chevrolet has more than 4,000 dealers, compared with 1,244 for its rival Toyota.

Addressing Wall Street analysts last week, Mr Wagoner was cautious about the outlook for the US car market, giving warning that 2008 would be a challenging year.

But he also said that there were indications that American car sales would improve in 2009 and beyond.

In a statement, Mr Wagoner said: “We're delivering on the turnaround plan we established in 2005 and have exceeded expectations on virtually all counts.”

He added that GM expected to gain $4 billion to $5 billion in savings in 2011 once the 2007 labour agreement made its impact.

“Frankly the outlook for 2008 is uncertain and a lot of people view it negatively,” he said.

General Motors is expecting US car sales to exceed 16 million units this year.

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