General Motors delivered the starkest warning from the car industry yet when it said yesterday it would run out of cash in the first half of next year.

The world's biggest car company said that this year's cash levels would approach the bare minimum required and that next year the company would be in a worse position unless it gets government help, or sells assets, or the economy improves.

The grave warning came as GM and Ford turned in dire financial results and Ford announced thousands of job cuts.

GM, which lost $4.2 billion (£2.7 billion) at its operating level in the third quarter, said “estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business” and said cash levels next year would be even weaker. Pre-tax losses were $2.5 billion, exceeding analysts' fears.

GM also revealed that it had abandoned merger talks with Chrysler. GM and Chrysler have been exploring a merger to try to pool their cash and cut costs but that too would depend on an injection from the Government of about $10 billion. The abandonment of the merger leaves both GM and Chrysler with few hopes to strengthen their business without outside intervention.

Ford and GM will cut thousands of managerial and administrative jobs. GM is pushing through cuts that have already been announced, while Ford yesterday detailed new job losses after clocking up operating losses of $2.98 billion in the third quarter.

Ford's losses amount to more than $3,000 for every car produced in the three months to September 30.

GM burnt through $6.9 billion in the six months to September 30. Ford also said that it it had spent $7.7 billion, nearly 30 per cent of its available cash pot, during the third quarter as it funded production cuts and made payments to Ford Credit in an attempt to encourage consumers to buy cars.

Ford and General Motors and Chrysler are pressing the US Government for $50billion in federal aid to help to keep them afloat through the crisis gripping the global car industry. This would be cash over and above the $25 billion the Government has set out for car companies to invest in green technology. They are struggling in a market that has seen US car sales fall to their lowest level for 25 years.

Rick Wagoner, chief executive of GM, said: “The US Government's actions to help to stabilise 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.”

GM's sales fell 13 per cent to $37.9billion compared with $43.7billion, which it said reflected “dramatic sales declines across the industry driven by unstable market conditions, instability in the credit markets and dramatic retraction in consumer demand, especially in North America and Europe”.

The carmaker will cut 10 per cent of its salaried staff as it attempts to combat the slump in worldwide sales. GM said it would cut about 2,260 white-collar jobs in North America. This year it cut salary expenses by 15 per cent, slashing again more than 2,000 jobs.

Alan Mulally, chief executive of Ford, said: “We continue to take fast and decisive action implementing our plan and responding to the rapidly changing business environment. We have a strategy that is broad and specific enough to handle the dramatic changes in today's environment.”

Ford's losses for the first nine months of the year now stand at $3.8 billion.

It is attempting to make $8 billion to $9 billion in savings by cuts in salaried staff and by reducing between $3 billion and $3.5billion on capital spending next year.

Ford recorded $2.7 billion in operating losses and $2.98 billion after tax. But new agreements on its healthcare arrangements improved the figures by $2 billion.

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