By Kevin Krolicki

GM said on Thursday it would now plan on U.S. auto sales dropping to near 10.5 million units this year, an extension of the depressed trend that took hold in the final months of 2008.

That would represent the lowest auto sales for the world's largest vehicle market since 1982.

By acknowledging a sharper downturn outside the United States, GM also faces stepped-up pressure to cut costs sharply in the emerging markets like Brazil and Russia that had helped offset deep losses in its home market.

The struggling automaker, now No. 2 in global sales behind Toyota Motor Corp <7203.T>, had targeted a return to profit when the U.S. market recovers to a 12.5 million sales rate. It said that now was unlikely until 2010.

Just a month ago, GM had projected U.S. auto sales of 12 million units in 2009 as the basis of a turnaround plan it submitted as condition of winning $13.4 billion in emergency loans from the U.S. government.

Other analysts have forecast U.S. sales in a range between about 10.2 million and 12.5 million units for 2009. Sales tracking service J.D. Power is projecting 11.5 million.

GM executives presented the lowered sales outlook at a conference of auto analysts in Detroit. It will form the basis of the automaker's updated restructuring plan to be submitted to the U.S. government next month.

"The U.S. economy and global economies have faced an unprecedented series of challenges over the past year," GM Chief Executive Rick Wagoner told the analysts, citing a risk of "global recession unlike any we have seen in the last 70 years."

Rocked by tighter credit and weak consumer confidence, the U.S. auto market plunged to 13.5 million vehicles in 2008, down from 16.2 million in 2007.

GM Chief Operating Officer Fritz Henderson said GM had faced scrutiny from analysts who questioned whether the automaker's planning assumptions from 2009 had been too optimistic.

"At this point, I'm not sure anyone can predict what's happening in the auto industry in terms of volumes," he said.

On a combined basis, GM cut its global sales forecasts by 6.3 million units for 2009, a nearly 10 percent reduction from the previous forecast that underpins the business plan GM presented to Congress in early December.

Henderson said Europe had followed the U.S. market into a deep downturn with a lag of about four months. "The market in Europe is extraordinarily challenging, and I expect that to continue in 2009," he said.

Henderson pledged "tough action" to cut costs in GM's offshore operations.

CUTTING DEBT, LABOR COSTS

GM received the first $4 billion under a $13.4 billion rescue package from the U.S. government late last month. It faces a deadline of February 17 to submit a restructuring plan to the "car czar" expected to be appointed by the incoming Obama administration to oversee the bailout.

GM's bondholders and the company have both hired advisers on how to complete a debt-to-equity exchange that the automaker expects will reduce its unsecured U.S. debt to $9 billion from nearly $28 billion.

The company also plans to halve the $20 billion it has promised to a health care trust fund affiliated with the United Auto Workers union by offering equity instead of cash.

GM began informal talks with the UAW this week about benefits and a federal target that it bring its hourly labor costs in line with those of Toyota and other Japanese rivals by year end.

Henderson said that could be done without UAW wage givebacks. The union will look to ratify any negotiated changes, he said.

GM is due to get a second loan tranche of $5.4 billion on Friday and is finalizing terms with the U.S. Treasury for a $1 billion loan to invest in lender GMAC.

Henderson said he expected to have those loan terms finalized on Friday.

(Reporting by Kevin Krolicki, Poornima Gupta and David Bailey in Detroit; Editing by Patrick Fitzgibbons, Andre Grenon, Richard Chang, Leslie Gevirtz)