General Motors Corp has warned there was a rising chance it could file for bankruptcy by June, as Fiat SpA and Chrysler executives met in a race to complete a tie-up the US government says Chrysler needs to survive.

GM shares tumbled 28 percent, its bonds fell and the cost to insure its debt rose, as the markets began to price in a bankruptcy that could wipe out stock holders and force deep losses on other creditors, even under the quick and "surgical" process described earlier by US officials.

GM and Ford Motor Co, which has not sought a bailout, announced incentives to woo recession-wary customers by covering some car payments for customers who lose their jobs.

US auto sales are expected to have fallen 40 percent in March from a year ago. Data is due on Wednesday.

In Detroit, GM and Chrysler began work to implement the tough restructuring dictated by the Obama administration as a condition for providing more taxpayer funds to the struggling automakers.

Fiat chief executive Sergio Marchionne flew to Detroit for talks with Chrysler's labor unions and creditors after President Barack Obama gave them 30 days to set up a partnership to save the ailing US car group.

Advisers to both GM and Chrysler have also been working to prepare for potential bankruptcy filings that would aim to preserve the best elements of the struggling companies while slashing debt and cutting pension and healthcare costs.

One plan under discussion for GM would be to form a new company of the automaker's best assets, while its laggard brands and money-losing assets would remain under bankruptcy protection, a person familiar with the strategy told Reuters.

GM stock has lost almost half its value since Monday when Obama outlined policies sharply limiting taxpayer funds for automakers that many had expected him to rescue.

Obama's thinking on the crisis facing the automakers had not changed since Monday, a senior administration official said. He was responding to questions about a Bloomberg report that Obama had determined that a prepackaged bankruptcy was the best way for GM to restructure and become competitive, which knocked US stock futures and the dollar.

"This report is not accurate," the official said. The White House wants a 60-day period for GM to reach deeper concessions with bondholders and the United Auto Workers union to play out, the official said, speaking on condition of anonymity.

GM chief executive Fritz Henderson, installed in the job on Monday in a board shake-up, said the top US automaker would have to close more plants and shed more factory jobs than it planned just a month ago.

"We need to go deeper and we need to go faster," he told a news conference at GM's Detroit headquarters.

The US Treasury would finance a court-supervised bankruptcy for GM if the process failed to deliver enough savings.

"By no later than June 1, if we're not able to accomplish this outside bankruptcy, we'll be in bankruptcy. It's pretty clear. The government was unequivocal," said Henderson, whose predecessor, Rick Wagoner, was forced out by the Obama administration on Sunday. - Reuters